El Nino Is Coming. Here's How It Will Have An Impact On Your Life-Saving Cup Of Coffee
El Nino is approaching and it's fueling concerns that the production of robusta beans in major coffee-producing countries like Vietnam and Indonesia could be hit resulting in a spike in prices.
“The now widely-expected transition to El Nino conditions in Q323 has stoked fears of reduced output in Vietnam and Indonesia, both major coffee robusta producers,” Fitch Solutions’ research unit BMI said last month.
This means that the prices of your regular espresso and instant coffee may soar forcing consumers to turn to cheaper substitutes.
Arabica Vs Robusta: What's The Difference?
Robusta beans are famous for their bitter characteristics and higher acidity. They contain more caffeine than arabica. Robusta coffee beans are smaller and rounder and have an and earthy flavor as compared to arabica. This variant is commonly used with arabica to provide the extra kick and a richer taste. The coffee species is easier to farm and produces high yields making it one of the cheapest coffee products in the world.
Robusta beans account for almost 40% of the world's coffee consumption and arabica makes up the rest 60%. The global economic challenges are said to be tilting the demand towards robusta which consequently led to the prices soaring to a 15-year high of $2,783 per ton towards the end of May, according to CNBC.
Well, arabica has always been considered more premium as compared to robusta. Arabica tends to have a smooth and sweet aftertaste with flavors of chocolate and sugar. They often have a hint of berries or fruits in them. Robusta, on the other hand, is stronger and harsher with a bitter aftertaste and grainy texture. It is also much more resistant to diseases and produces far better yield, The Perk Blog said.
What is El Nino?
El Nino, meaning little boy in Spanish, is the name given to a climate pattern that affects weather and subsequently economies worldwide. El Nino is associated with the sea-surface temperature of the equatorial Pacific Ocean. The phenomenon is marked by a warming of the sea surface temperatures in the central and eastern equatorial Pacific Ocean, typically developing around Christmas.
El Nino Forecast For This Year
As per the World Meteorological Organization, there is a 60% chance for a transition from the ENSO neutral to El Nino from June to July 2023.
Vietnam's National Centre for Hydro-Meteorological Forecast predicts a 70% to 80% chance of El Nino coming in mid-2023, and extending into 2024. The organization expects record temperatures in the country during that period, as per Reuters.
How Will El Nino Affect Our Coffee?
El Nino conditions are said to bring about higher temperatures across Southeast Asia in combination with below-average rainfall, which lead to a decrease in coffee production, as per the BMI report.
In an El Nino year, it is not uncommon in Vietnam and Indonesia, to see a 20% fall in Robusta beans production, according to Shawn Hackett, president of the commodity brokerage firm Hackett Financial Advisors, as reported by CNBC.
Prices of Robusta Beans Have Already Started Soaring
Robusta bean prices have soared to a record high. "Asia, generally speaking, has taken a liking to robusta more so than arabica, and as such the demand for robusta is growing at a much faster rate than the demand for arabica," said Hackett.
"While the reduction in washed arabica imports is partially due to lower availability, the shift to robusta shows that cheaper coffees are being heavily preferred by the European market," said Natalia Gandolphi, an analyst at HedgePoint Global Markets’ Intelligence.
Gandolphi also says that she expects a deficit of around 4.16 million bags of robusta beans from October 2023 to September 2024.