Trouble Brewing for Coffee Suppliers Amid Brazilian Drought

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According to Bloomberg News, “Production in Brazil, the world’s top grower, may drop as much as 18 percent to 40.1 million bags when the harvest ends next month, the National Coffee Council estimates, after a 3.1 percent slide last year. With damage worsening before the start of spring in the Southern Hemisphere, the council said farmers may collect less than 40 million bags in 2015, creating the longest slump in five decades.”The issues stem from the imposing Brazilian drought, which analysts are calling one of the worst the country has seen in recent history. The scarcity of rain primarily affects watering via reservoirs that border some of Brazil’s major coffee plantations.

The decline in production means higher prices for suppliers. The cost of the unroasted bean continues to soar.

The Wall Street Journal reports, “Global coffee production could fall short of demand next season by the largest amount in almost a decade due to smaller harvests in Brazil, the International Coffee Organization said last month.”

Coffee season runs from April through Sep. Although much of the crop has already been collected, many parts were damaged or unusable, which leads to higher supplier prices for the remaining commodity. Plantation owners expect the crops to worsen in the following seasons.

To make up for the drought, many farmers have purchased complex equipment to get the most out of the diminishing crops.

In addition, Reuters notes: “Years of low coffee prices followed by the worst drought in decades in Brazil have pushed even the smallest family farmers to buy modern machinery rather than rely on increasingly scarce and expensive labor.”

Much of the global coffee supply comes from small farming families who typically rely on individual labor rather than large-scale machine operations. Machines can help farmers pick the crops, as well as reduce water waste.

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