This article was written by UC Davis ARE PhD student Natalya Slipchenko.  It is the second in a series of excellent articles written by students in my ARE 231 class this fall.

The coffee we drink may come from many parts of the world, but recent bad weather in Brazil has raised the possibility of global shortages. 

There are two species of coffee plant: Coffea arabica and Coffea canephora. Originating in Ethiopia, Coffea arabica produces beans that are used to make the aptly named Arabica coffee; it is the more popular type and over 60% of the coffee humans drink is from this plant. Types of Arabica that you might recognize include Typica, Caturra, Kona, Pacamara, Villalobos, and others. The beans of Coffea canephora are made into Robusta coffee, which originates from West Sub Saharan Africa. This coffee tastes more bitter and is more typically used in instant coffee, espresso, and sometimes as a filler for other blends.

The main differences between Arabica and Robusta beans are their taste, growing environment, price, and quality. 

Coffea canephora (Robusta) is resilient, grows well at altitudes of 200-800 meters, and is not very susceptible to damage from pests. The production costs are low, and yields are relatively high. In contrast, Coffea arabica (Arabica) is fragile and requires cool subtropical climates. The plants require more pest control and can also be damaged by cold temperature or poor handling. They grow best at higher elevations (600-2000 meters).

The top 9 highest coffee producing countries are Brazil, Columbia, Ethiopia, Honduras, India, Indonesia, Mexico, Uganda, and Vietnam. Brazil has the largest area harvested, followed by Indonesia and Colombia.

Although Brazil has consistently farmed the largest area in acres of coffee, Vietnam has produced the highest coffee yield per hectare by a large margin.  

Vietnam produces almost exclusively Robusta coffee, whereas Brazil produces a large share of both Arabica and Robusta coffees. Any negative shock that affects Brazil will significantly affect the supply of Arabica coffee, while negative shocks to Vietnam will affect Robusta coffee. Most other countries specialize in either Arabica or Robusta production.

Unfortunately for coffee producers and consumers, and in addition to experiencing a drought this year, Brazil experienced a series of frosts between July 1st and July 20th. A severe frost decimated the coffee plants in Minas Gerais and São Paulo – the largest (Arabica) coffee producing regions in Brazil.

Due to frost damage, non-bearing plants (younger than 3-5 years) likely will no longer be capable of producing cherries (and thus no coffee beans). Moreover, the non-bearing acres that were affected must now be replanted and wait an additional 3-5 years before bean production can commence. This weather shock has long-term effects on the supply (and price) of coffee due to the perennial nature of the plant.

On the other side of the world, Vietnam has been experiencing significant supply chain restrictions due to a worsening Covid-19 outbreak. The exporting capital of Ho Chi Minh City was under lockdown for over 100 days by the middle of September. With these lockdowns in place, exports of coffee beans have been delayed in processing and export. While the supply of Robusta beans has not been negatively affected like that of Arabica coffee in Brazil, the price of Robusta will be high since it will take a while for the supply to leave Vietnam.

We can see these supply shocks and their effect on the markets by looking at the December 2021 Coffee Arabica futures prices (black) and November 2021 Robusta futures prices (blue). Over the past 6 months prices for both futures have increased by about 30%. The prices spiked significantly in late July when the frosts hit Brazil – especially for Arabica coffee. 

Overall, we should be concerned about coffee quality in the near future. The significant shock to the supply of Arabica beans for the coming years will likely cause the coffee at your local retailers and coffee shops to increase in price, and some coffee retailers may start blending existing Robusta coffee bean supplies into Arabica blends. If your coffee starts tasting more bitter in the coming months to years, this may be why!

Acknowledgment: Special thanks to Bruno Pimenta for finding and providing Brazilian coffee data

You can replicate the figures in this article using this R code.