ECONOMY & WORK
MONEY 101
NEWS
PERSONAL FINANCE
NET WORTH
About Us Contact Us Privacy Policy Terms of Use DMCA Opt-out of personalized ads
© Copyright 2023 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.
MARKETREALIST.COM / NEWS

El Nino Is Coming. Here's How It Will Have An Impact On Your Life-Saving Cup Of 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.
PUBLISHED JUN 15, 2023
Cover Image Source: Pexels | Polina Tankilevitch
Cover Image Source: Pexels | Polina Tankilevitch

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.

Pexels | Livier Garcia
Pexels | Livier Garcia

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.

Pexels | mali maede
Pexels | mali maede

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.

MORE ON MARKET REALIST
Belz later said that nothing is as good as the win and it was his dream to be on the show.
14 hours ago
Several commenters pointed out the possible reasons behind this issue.
16 hours ago
Her technique was unusual but it did the trick and everyone was elated about the spectacular win.
18 hours ago
Seeing others win big may be exciting but not many people quite the tax burden that follows.
1 day ago
The host was asked about the possibility of four $100,000 wins in a row, but said that it was virtually impossible.
1 day ago
The shopper was alarmed after seeing what she thought of as objects crawling around.
1 day ago
The player had proceeded to the bonus round after simply adding one letter to another contestant's guess.
2 days ago
Steve Harvey's facial expressions are gold especially when he is geuinely shocked by a contestant.
2 days ago
The host regretted celebrating the answer as it could put his relationship in jeopardy.
2 days ago
Plinko is believed to be a game of luck by many but Carey might know a few things that we don't.
2 days ago
She was again approached by the employee who had first stopped her, and hoped that the one who helped her won't be fired.
3 days ago
Turns out the player earned the quick-witted host's respect with a shared love for football.
3 days ago
Turns out the host of Family Feud is a stickler for the rules and went on to roast the woman.
3 days ago
Viewers and the host were astonished to see just how Veonn finished with the exact sum she needed.
4 days ago
Mark Cuban said he could be the bigger person and let it go, but added that he wasn't.
4 days ago
Zoe Grobman who appeared on the show's Second Chance Tournament, addressed the issue on Reddit.
4 days ago
Cody Munger who won the "Big Tournament Championship" last year, shared his insight on Reddit.
5 days ago
The creator posted a video sounding an alarm against certain objects found in the "Great Value" cheese of Walmart. 
5 days ago
The player was left with very little to work with as most of her letters weren't on the board.
5 days ago
With two $1 million dollar deals on the table, entrepreneur Chet Beiler managed to pull off a blunder.
5 days ago