Freak Cold Snap In Biggest Coffee Exporter Sparks Huge Price Surge
On Tuesday, a wicked cold snap, with temperatures dropping below zero, delivered a massive blow to farmers across Brazil’s coffee belt, damaging trees and destroying next year’s crop, according to Reuters.
Temperatures in Brazil’s coffee-growing regions recorded -1.2 Celsius (29 Fahrenheit) on Tuesday in southern Minas Gerais, which was the coldest since 1994.
“I’ve never seen something like that. We knew it would be cold, we were monitoring, but temperatures suddenly went several degrees down when it was already early morning,” said Mario Alvarenga, a coffee producer with two farms in Minas Gerais, Brazil’s largest producing state.
— Maytaal Angel (@ReutersAngelM) July 22, 2021
Futures for arabica beans in New York soared more than 7.5% Thursday. Since Tuesday’s frost, future prices are up more than 23.5%, hitting 6.5-year highs.
The unexpected frost is compounding issues for farmers who have been inundated with massive droughts. Meanwhile, probabilities for a return of La Nina this fall/winter are increasing.
Another day of low temperatures in São Paulo, Minas Gerais, & Paraná states. The frost this time hit much more places. 70% of my clients were hit 40% severely. Temperatures in low soil layers were -4,4°C.Sadly the situation is getting worst. ~Jonas Ferraresso, São Paulo, Brazil pic.twitter.com/2kxrnzGirB
— Stuart A. Brown (@StuOnGold) July 22, 2021
“I will probably have to take out some 80,000 trees, they are burned all the way to the bottom,” said Airton Gonçalves, who farms 100 hectares (247.11 acres) of coffee in Patrocinio, in the Cerrado region of Minas Gerais.
“I was going to the farm yesterday, and a sensor in the truck started to alert me about ice on the road. I thought the system had gone crazy. But when I got to the farm, it was covered in ice, the roofs, the crops.”
Gonçalves estimates his production in 2022 will decline to approximately 1,500 bags from 5,500 bags.
Ana Carolina Alves Gomes, a coffee analyst at Minas Gerais agriculture federation Faemg, said that frosts were also reported in the south of Minas Gerais in the Mogiana area in Sao Paulo.
“Only time will tell how much will be lost. We already had a small crop this year,” she said.
Coffee broker Thiago Cazarini, who operates in Varginha, South Minas, said estimates so far suggest exporters and agronomists see a potential reduction of 1 to 2 million bags in next year’s harvest.
“For a clearer view, proper time is needed. Next week it will be more accurate,” Cazarini said.
We’ve warned that cheap coffee is no more, and a global deficit is coming.
Adding to the already extreme food inflation, Americans will likely be paying more at Starbucks in the coming months, if not next year, for their favorite expresso. So to say inflation is “transitory” is an understatement as it will linger through 2022.