When it rains, it pours, and when there's a drought, prices go up.
In this case, the drought is in Brazil and it has the US running low on coffee. That means your morning cup of joe is about to get more expensive.
The drought has decreased crop production just as congested shipping ports have caused US coffee stockpiles to hit the lowest they've been in six years, Bloomberg reported. So far, roasters have been relying on their inventories instead of hiking prices, but that will only last so long and wholesale prices have climbed.
Potential losses from the drought could affect half of Brazil's coffee crops next year, soft commodities expert Judith Ganes told Reuters in December. She said it was hard to determine how badly Brazil's Arabica beans were hit, but "there will be major failure," she said. "I saw areas with 100% losses, 50% losses, 30% losses."
Arabica-coffee futures in New York have increased by nearly a quarter since the end of October, per Bloomberg. And Marex Spectron recently upgraded its global coffee deficit forecast from 8 million bags to 10.7 million bags, citing the drought.
Logistic problems have only compounded the shortage brought on by declining crops. Some facilities in Dinamo, Brazil, told Bloomberg don't have enough containers to ship out coffee. Some containers and charter vessels aren't currently available, causing back ups and delays at shipping ports.
David Rennie, head of Nestle's coffee brands, told Bloomberg it could take two to three years for take-away coffee to return to pre-Covid levels.
But coffee isn't the only goods shortage hitting the global economy as it reopens this year.
US shipping ports have become unusually congested as imports pick up speed due to surging and unpredictable consumer demand, delaying shipments of all types, from sneakers to meat. Companies struggled to estimate demand correctly, partly explaining the pileup, while factory production was halted off and on during the work-from-home economy of 2020.
The shortage is particularly acute in certain spaces, such as in the semiconductor chips needed to make personal electronics and products with electronic components such as cars. Finally, February's Texas Freeze suspended much of the US oil sector and the manufacturers who rely on it, making gas harder to come by and things refineries produce, like plastics, more expensive.
That's not to mention the shortage of things like bikes, fitness equipment, and even lumber, the latter of which has added to already high housing prices. As supply dwindles, all of these things become things Americans could end up paying more for.
But you know what they say, when it rains, it pours.
