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Brazil's Coffee Output Plunge Could Mean Starbucks Prices Are About To Rise

Brazil’s Coffee Output Plunge Could Mean Starbucks Prices Are About To Rise

Brazil’s federal government is projecting total coffee output in the world’s top-producing country will slump for the 2021 growing season, according to Reuters

Companhia Nacional de Abastecimento (Conab), the government’s food supply and statistics agency, said total coffee output would plunge 22.6% in 2021, to an expected 48.8 million 60-kilo bag. 

Conab forecasts an output of 33.36 million bags of Arabica this season and 15.44 million of Robusta.

There are two main species of coffee: Arabica and Robusta. Starbucks purchases only Arabica beans cultivated at high altitudes. About 70% of the world’s Arabica beans are grown in Brazil. Starbucks, and many other coffee chains, could soon feel the burn as wholesale price increases will likely be passed onto consumers. 

We’ve already mentioned coffee shortages are brewing as global supplies are shifting into a deficit as drought in Brazil slashes output. This has resulted in surging wholesale prices and US supplies slumping to a six-year low. Savor today’s cheap cup of joe because retail prices will rise. 

More on the drought and how crop and food prices are skyrocketing to multi-year highs, and the culprit is likely due to La Nina, a weather pattern characterized by the cooling of the equatorial Pacific that triggers atmospheric shifts and causes droughts in some regions of the world and wetter conditions in others. 

Brazil has been devastated by drought during its traditional rainy season. 

ICE Coffee futures for Arabica coffee have soared to multi-year highs on output declines in South America. 

Meanwhile, La Nina has disrupted weather patterns worldwide, leading to terrible droughts in South and North America. Consequently, food prices have soared to the highest levels in a decade

As much as the Federal Reserve expects “transitory” inflation – La Nina altering weather patterns could exacerbate food inflation and create years of elevated crop and food prices.

Tyler Durden
Wed, 05/26/2021 – 05:45

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