Covid-19 and the coffee industry

The impact of COVID-19 on the coffee industry

Article by Justin Metcalf

Popular with consumers around Australia, the coffee industry is both valuable and expanding.

However, with Covid-19 slowing both production and demand, and disrupting the global supply chain, the international coffee industry has stalled in recent months.

With Australia being a huge coffee-drinking nation, of course, Covid-19 has had an effect on revenue. The impact of Covid-19 on the overall global coffee supply chain has been enormous from seed to cup. After a shock in both demand and supply, coffee prices have been volatile. At the beginning of the pandemic prices had started to fall, and yet over the last 2 years we have seen them increase based on several reasons. Many coffee growers have indicated that they predict travel restrictions and social distancing measures (among other impacts of Covid-19) will affect their ability to employ workers and lead to a higher cost of production.

Looking down the supply chain, export nations have negative downstream factors. Issues such as that of logistics, container availability and port operations would all feel an unfavourable impact of Covid-19. Also, issues with supply chain contracts have become challenged, or even cancelled.

Climate change has also had an effect on the coffee industry. Being involved as a board member of the Asean Coffee Federation, many of our board discussions are based on climate fluctuations/change relating to yield drops within the region. What has come to light in our discussions is that due to climate change (such as abnormally high temperatures or reduced rainfall) during growing periods, the Asean farmers are not able to produce the same amount of coffee as normal, resulting in lower crop yields.

On top of that, higher temperatures create a breeding ground for pests and disease, which may also enable the spreading to regions where they couldn’t normally survive.

This could increase the costs of coffee production even more as farmers work harder to fight issues such as leaf rust and coffee berry borer.

With further additional consequences such as the prevalence of coffee leaf rust and other pests/ diseases that may increase, the rising cost of mitigation measures such as pesticides, fertiliser, and technical assistance will have a long-term impact on price increases.

Communities are also being displaced as temperatures change. Another impact of changing temperatures is that the ideal altitude for growing coffee may change with it. Looking at Arabica as an example, warmer temperatures could push production of this bean type higher up mountains – displacing the communities that live there. Farmers who live in lower lying regions may have to adapt and move upwards, or risk losing their livelihoods.

Cup of coffee price increase

The impact of Covid-19 on the global coffee supply chain, and the changing climate certainly will continue to influence the price of your cup of coffee. Looking over the few years prior to Covid-19 a standard café latte across Australia was between AUD$3.50 - $3.96. Moving forward to the year 2021, your average price of a standard café latte is between AUD $4.00 - $4.50. Once again, depending on the outlet and the quality of coffee they serve.

There have been many reports in the media that the coffee prices will continue to increase as we move into 2022. I am certain that this will be the case based on not only raw coffee prices but increases in cost of goods across the board. Rents, G.S.T, staffing shortages, logistics, and general cost of living will all play a role in this.

One final point to note, well made, good quality coffee will always be available to us if there is a demand, and I don’t see the demand going away anytime soon. Happy drinking!

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