(Australia Broadcasting Corp.)
Australians may avoid paying extra for their coffee despite a global shortage after the world's largest growing country lost up to 10 per cent of its crop to frost.
According to Rabobank’s Head of Agri Commodities Market Research, Carlos Mera, this is the worst frost the Arabica Coffee Belt in Brazil had experienced in a long time.
"I've been in the coffee industry for a decade and a half, and I've never seen anything like it," he said.
"Brazil is the main producing country. It produces over 40 per cent of all the coffee in the world.
"Depending on the year, arabica can be up to 50 per cent of all the coffee in the world."
While this year's harvest has escaped the worst, the biggest impact will be felt in the 2022-23 harvest.
Mr Mera said Brazil wouldn't be back to its full growing capacity for years, creating a world shortage.
"They've lost so many leaves, many farmers will decide to prune them back," he said.
"If they skeletonise the trees, which is a technique used in Brazil, those trees will not produce next year."
Coffee trees take up to 7 years to produce a full commercial-sized crop, so if farmers need to replant trees, it's a long recovery.
'Happy to pay for the quality'
Mr Mera said despite the world price rising 25 per cent already, it may not be passed on to Australian consumers at the till.
He said if you break down the price of a cafe-made coffee, only 3 to 6 per cent is for the beans, the rest is for the milk, the store's rent and the cost of labour, among other things.
"The increase in coffee prices that we've seen over the last year in the raw commodity may not translate much into coffee shops," he said.
"If it does, it's going to be very very small."
Currently, Australia imports about 15 per cent of its coffee from Brazil, but importers will be looking to other countries to fill the shortage, and that's where the price rise could be felt.
"In a coffee market that's as developed as Australia's, I tend to believe most might go for other arabica beans around the world.
"They tend to be a little bit more expensive than Brazil, but the Australian consumer will be happy to pay for the quality."
While Brazil is known for having some of the cheapest coffee in the world, Australian-grown coffee normally attracts a premium price.
Consumers buying locally grown beans won't feel an added price pinch.
"The coffee-growing industry in Australia is like a super speciality," Mr Mera said.
"Prices are already detached from the mainstream and those prices are already very expensive."
In Queensland's Far North, Skybury Coffee produces around 40 tonnes of green coffee a year.
General Manager Candy McLaughlin said Brazil's loss wouldn't impact them.
"We create our own market. We export 50 per cent of what we grow," she said.
"We have a loyal following within Europe.
"They're prepared to pay a price that we think is fair and reasonable and well above what the Brazilian prices."
Making up the shortfall
With Brazil's industry years away from a full recovery, Mr Mera said we could expect other countries to try and increase their production.
"This will be in countries where fertiliser usage is not very intensive. Farmers there may start using more fertilisation," he said.
This includes Colombia, Peru, Honduras and countries in Asia like Indonesia and India.
In the longer term, a smaller coffee-growing country like Australia may try to increase its plantings, but there are challenges, according to Ms McLaughlin.
"I know those in New South Wales struggle with land opportunities because there's a real push and pull between residential and farming," she said.
"Whereas in North Queensland, there's lots of opportunities to convert cane properties into coffee."
Ms McLaughlin said there were also issues around infrastructure for new growers.
"The challenge for us is it really needs to have a good community approach," she said.
"You need to centralise your mills. You need to have a harvester that growers can share; otherwise, you need to have a significant investment behind you."
Problem plagued industry
Coffee prices have been increasing over the past year, even with worldwide lockdowns impacting the hospitality industry and decreasing demand.
Mr Mera said factors like the price of shipping, roadblocks in Colombia and companies stockpiling beans were to blame.
But he hopes as the world slowly opens up again, it will return confidence to global supply chains.
"With the vaccination programs, you would expect fewer disruptions across the supply chain," he said.
"That's from farm level, transport, fewer disruptions in the ports and fewer disruptions in movements across national borders."
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