Popular with consumers around Australia, the coffee industry is both valuable and expanding.
However, with Covid-19 slowing both production and demand, and disrupting the global supply chain, the global coffee industry has stalled in recent months.
With Australia being a huge coffee-drinking nation, of course Covid-19 has had an impact in revenue.
The impact of Covid-19 on the overall global coffee supply chain has been enormous from seed to cup.
After a shock in both demand and supply, coffee prices have been volatile. From the beginning of the pandemic prices fell and yet over the last 2 years we have seen them increase based on several issues.
Many coffee growers have indicated that they predict travel restrictions and social distancing measures (among other impacts of Covid-19) will affect their ability to employ workers and lead to a higher cost of production.
Looking down the supply chain, export nations have negative downstream factors. Issues such as logistics, container availability and port operations would all feel a negative impact of Covid-19. Also, concerns with supply chain contracts have become challenged, or even cancelled.
The impact of climate change on the coffee industry
Being involved as a board member of the Asean Coffee Federation, many of our board discussions are based on climate fluctuations/change relating to yield drops within the region. What has come to light in our discussions has been due to climate change (such as abnormally high temperatures or reduced rainfall) during growing periods. The Asean farmers are not able to produce the same amount of coffee as normal, resulting in lower crop yields.
On top of that, higher temperatures create a breeding ground for pests and disease, also allowing the spread to regions where they can’t currently survive. This could increase the costs of coffee production even more as farmers work harder to fight problems such as leaf rust and coffee berry borer.
With these additional complications, such as the increase of coffee leaf rust and other pests/diseases, the growing cost of mitigation measures such as pesticides, fertiliser, and technical assistance will have a long-term impact on price increases.
Communities displaced as temperatures change
Another impact of changing temperatures is that the ideal altitude for growing coffee may change with it. Looking at Arabica as an example, warmer temperatures could push production of this bean type higher up mountains – displacing the communities that live there. Farmers who live in lower lying regions may have to adapt and move upwards, or risk losing their livelihoods.
Cup of coffee price increase
The impact of Covid-19 on the global coffee supply chain, and the changing climate certainly will continue to influence the price of your cup of coffee.
Looking over the few years prior to Covid-19 a standard café latte across Australia was between AUD$3.50 – $3.96. Moving forward to the year 2021, your average price of a standard café latte is between AUD$4.00 – $4.50. Once again, depending on the outlet and the quality of coffee they serve.
There have been many reports in the media that the coffee prices will continue to increase as we move into 2022. I am certain that this will be the case based on not only raw coffee prices but increases in cost of goods across the board. Rents, GST, staffing shortages, logistics, and general cost of living will all play a role in this.
One final point to note
As always, well made, good quality coffee will continue to be available to us if there is a demand, and I don’t see the demand going away any time soon.
Article by Justin Metcalf