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Dhaka Tribune

Coffee prices soar on poor harvests, new consumers

Traditionally tea-drinking Asian countries are increasingly warming up to coffee, driving demand

Update : 26 May 2024, 07:43 PM

Germans have been drinking coffee for almost four centuries now, with the beverage having gained wider popularity in the 19th century when consumption spread across all social classes. The beverage became deeply ingrained in German culture, leading to various coffee traditions and rituals, such as Kaffee und Kuchen — coffee and cake ­— in the afternoon.

After World War II, the coveted beans were even the preferred contraband of smugglers from the neighboring Netherlands because the German coffee trade had largely collapsed with the end of Hitler's Third Reich.

It was not until the start of the so-called post-war economic miracle in the 1950s that the Germans could quench their thirst for coffee again.

Traders 'navigating challenging conditions'

Now, more than 70 years after the war-induced coffee scarcity in Germany, retail coffee prices in Europe's biggest economy are again significantly rising. Tchibo, Germany's leading coffee retailer, says prices are not only on a tear in Germany, but around the globe.

In early May, the Hamburg-based company announced it would have to "adjust" its prices for roasted coffee. "Over the past year, many costs have continued to rise, including those for raw coffee. In order to continue to offer our customers the usual quality, we have to act now," Tchibo said in a press release.

Fairly traded coffee is no exception to the global trend of rising prices. GEPA, Europe's largest importer of fair-trade food from the Global South, reported a decline in sales earlier this year due to "customer restraint."

"We are currently navigating an economically challenging situation," GEPA's managing director Matthias Kroth told Germany's Evangelical Press Service, blaming high raw coffee and cocoa prices, as well as the negative effects of the Ukraine war on global supply chains.

Andrea Fütterer, head of the Policy and Advocacy at GEPA, is notably concerned about the current wild swings in market prices and attributes them to the widespread coffee monocultures that make plantations vulnerable to drought or excessive rainfall in the wake of climate change.

'Perfect storm' hits global coffee markets

On the other side, coffee farmers in developing countries are also increasingly feeling the negative impact of climate change.

Fairtrade International, an umbrella organization representing farmers and cooperatives in producing countries, told DW that unfavorable weather conditions, especially in Southeast Asia and South America, currently upset the "delicate balance between supply and demand" and are driving prices higher.

"Long droughts in Vietnam, the main producer of robusta beans, have damaged the plants. Meanwhile, Brazil, the main source of arabica beans, suffers from heavy rains affecting the harvest," Fairtrade International said in an email to DW. It concludes that climatic uncertainties, disruptions in international trade routes, and the speculative nature of many investment portfolios have "created a perfect storm in the coffee market."

Brazil on the bright side of trade

Carsten Fritsch, a commodities analyst with Germany's Commerzbank, says emerging geopolitical conflicts and existing wars are currently overshadowing markets worldwide. The specialist for so-called soft commodities like food and beverages has analyzed coffee markets recently.

"Arabica, unlike robusta, is hardly affected by transport disruptions through the Red Sea, as the major arabica producers don't use this route. It's a different story for robusta coffee, predominantly produced in Southeast Asia," Fritsch told DW.

As a result of the surge in the price of robusta coffee, the price of arabica beans will also increase, he added, boosting earnings of growers in Brazil, which produces 80% of the world's arabica coffee.

Moreover, the Brazilian coffee authority is expecting a bumper harvest for the 2024/25 season, with 5.5% higher yields compared with the previous year and a total output of about 58.1 million 60-kilogram (132-pound) bags — 40.75 million bags of arabica coffee and 17.33 million bags of robusta.

Coffee roasters sit on the fence

Despite expectations of a good harvest in Brazil, Steffen Schwarz expects coffee prices to continue rising on the global markets. The owner of a German roasting company believes price pressure will also come from a shortage of seasonal laborers on coffee plantations and further rising consumption in the growing countries themselves.

"We have lower yields, a labor shortage, and at the same time, rising demand," he explained in an interview with the German news magazine Spiegel recently, noting that drinking coffee has become a lifestyle trend beyond the popular "barista culture" of the United States and Europe.

More and more Asians, especially in China and South Korea, are developing a liking for coffee, he said, causing global demand and prices to continue rising.

He believes that people should be willing to pay at least between €20 ($21) and €30 per kilogram if they "really cherish good taste and care about the ecological and social aspects" of coffee growing. 

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