Roasters and importers brace themselves for the impact of extreme weather and Covid disruption on supply.

Anyone who values a good coffee will likely find their morning brew gets more pricey in coming months.

Kiwis consume about 2.2 kilograms of coffee per person, each year. And most of that coffee comes from the world’s largest green coffee bean producer, Brazil.

But in recent weeks coffee importers have been holding their breath as Brazil assesses the damage from the worst frost seen in two decades that is expected to have written off about four to five million bags of coffee.

That’s 240 million kilograms of coffee beans.  “That’s huge,” says coffee importer Alice Burton.

What do you think? Click here to comment.

New Zealand imports only about 450,000 bags a year from Brazil. Last year we imported $16 million worth of coffee from Brazil, which is $4m more than in 2019.

Wild weather, from a drought at the start of the year to a severe frost, contributed to some big swings in its commodity’s price. 

After hitting a seven year high in July, because of the frosts, earlier this month the price dropped 8.6 percent to US$1.7955 a pound, the biggest drop since March 2008. This price was still up more than 55 percent compared to a year ago, though.

Coffee is a biennial crop, and this year was its “off” year after Brazil produced 49.3 million bags in the 2019/20 year, almost reaching its 2018 record of 61.66 million bags. 

That strong yield along with coffee shops shutting around the world because of Covid, fuelled the world through 2020.

But this year stocks have reached record lows, says Alice Burton from John Burton Limited, the country’s largest importer of green coffee beans.

She says importers have bought their coffee for the next 12 months but the drought, followed by the frost and more dry weather forecast, will affect the growth of the following year’s coffee, the 2022/23 crop.

Cost of climate 

Burton says there is a reluctance from growers to invest in more weather-resilient varieties of coffee, despite the emerging impacts of climate change. Because the coffee plant takes three years to flower, farmers in countries like Brazil and Colombia would rather grow another plant they could get an immediate return on investment from.

“There hasn’t been a frost like this since 1994, this is off the back of a drought in Brazil, and now there is no rain predicted for the next month or so. So there might be another drought which could affect the flowering process of the next crop,” she says.

“It’s just more extreme weather patterns than we saw in the past.”

Cam MacFadyen, coffee buyer for the entire Allpress Group including New Zealand, Japan, Singapore and the United Kingdom, says the effect of the wild weather cannot be underplayed.

“To have a drought and a frost back-to-back affecting the same crop is pretty unfortunate,” MacFadyen says.

The frosts have killed the younger trees, which take three years to flower, and destroyed the buds that produce the fruit (coffee) for the next harvest, he says.

Coffee is a delicate plant, mostly grown across the tropical belt, and doesn’t put up with harsh weather, MacFadyen says. Brazil’s wild weather has also affected other crops like sugar and orange crops.

“It’s really just a correction to a long period of time where we’ve seen prices which were unsustainably low to farmers.”
– Justin Purser, Trade Aid

While the frost has subsided, the full extent of the damage across the 200,000 hectares of land won’t be known till September, he says.

In its weekly commodities review Rabobank has warned importers of 66 percent chances of another La Niña by the end of the year. 

As with most agricultural industries, MacFadyen says the medium to long term future for coffee is “a bit scary” because of global warming restricting where coffee can be grown.

He says because of this imminent threat, millions of dollars are being poured into finding new varieties, more weather resilient varieties of the crop.

MacFadyen says Allpress has enough coffee allocated for next year, but beyond that things look “dicey”.

“We’ll see what happens over the next little while but this is all just part of the game really,” he says. “We’re glad they didn’t receive another frost, the damage done last week will be felt for a couple of years by the growers impacted the most. Hopefully they can bounce back with a decent crop next year.”

Fraught freight

The more immediate impact importers and roasters are dealing with are a result of Covid-related supply chain disruptions right from the farms to the ports.

Importers would be lucky to get space on a ship six weeks in advance, as shipping companies cancel or roll over bookings week to week, making it hard to plan ahead, MacFadyen says. “It’s just kind of never-ending.”

Ocean freight costs have quadrupled and delays mean stock is waiting at Singapore ports for six weeks instead of two or three days, Burton says.

This has pushed back delivery from 60 days from port of origin to New Zealand, to more like four months. “Last year we saw people stockpiling coffee, so we’ve seen ebbs and flows of being overstocked and then understocked.”

Ocean freight costs have quadrupled and delays mean stock is waiting at Singapore ports for six weeks instead of two or three days. Photo: Unsplash

Burton says the price of coffee is determined by supply and demand, and traded on the cash (physically buying coffee) and futures market (to determine future contracts). 

Coffee has different grades depending on its origin. Usually when the futures market, known as the C Market, goes up, the differentials come down to give coffee prices stability.

But over the past year, supply chain issues and lower crops mean when the price has risen, differentials have too. Prices have gone up over the past six months but consumer demand hasn’t waned. 

Trade Aid food manager Justin Purser says this is ultimately good news for the farmers on the ground, who for many years have struggled with falling coffee prices.

“It’s really just a correction to a long period of time where we’ve seen prices which were unsustainably low to farmers,” he says.

“We’re seeing it as good for the health of the industry as a whole if coffee producers get some benefit and recover a little more value of their coffee.”

Last year the Colombian government set up a $64m coffee fund to support growers whenever prices dropped below the cost of production to stop farmers leaving the industry. Since then these supply disruption and political unrest (road blockages) in Colombia has only increased the price of coffee further.


Most roasters don’t like to stray away from their flavour profile, which is their IP in the coffee game, Burton says. But she says in recent months more roasters are changing their blends. 

“Blends are interchangeable, they often want to keep one price and one flavour profiles,” she explains.

“But in saying that we’re definitely having more blend changes this year because of supply chain issues. We don’t usually run out of coffee, but this year stocks are up and down.”

“It’s just kind of never-ending.”
– Cam MacFadyen, Allpress.

MacFadyen says a third of Allpress’ blend is made up of Brazilian green bean coffee and the rest comes from Colombia or other parts.

The burning question on everyone’s mind though is does all of this mean my coffee will be more expensive?

Roz Cattell​, president of the New Zealand Specialty Coffee Association, says many factors make up the price of a cup of coffee.

The freight costs and weather issues affect the price of the bean, but cafes have numerous other costs, including rising wages, overheads, the price of milk and more expensive milk alternatives, the takeaway cup itself and whatever slim margins they can make, Cattell says.

“It’s very unknown at the moment. We need to appreciate what we’re actually putting into your cup of coffee,” Cattell says. “There’s a lot in that cup.”

The coffee only makes up about 10 percent of the total price, Trade Aid’s Purser says. “It’s too early to say, still.”

But according to Statistics NZ, the average price of a takeaway coffee reached $4.12 in June, that’s 18.7 percent more than in 2011. Inflation over that period was 14.6 percent. The average price of coffee, though, has only gone up 12 cents in the past year.

The question is whether rising costs will put a dent in demand or consumers will continue to absorb the rising costs.

Leave a comment