“Inflation and the Finite endgame” Coffee prices and climate change. (A.Glass 2021)

 

From Top to Bottom:  Heat map of South America 26th October 2020. Dark redish hues is the drought, note Brazil being more impacted. Image: NASA.  Paraguay River, Paraguay. A major shipping line, note 2017 and 2020, the river narrowing and becoming shallower due to the drought. Image: NASA. July 2021 Coffee Futures maintaining its yearly high.  

Brazil after 150 years is still the largest coffee producer in world, producing since 2020, 3,558.00 metric tons of predominantly Arabica Coffee for global markets, yet the country is facing its worst drought in 91 years to which moisture is critical for a good coffee bean harvest.  Undoubtedly coffee production has been effected by a severe drought and according to the Brazilian Agricultural Ministry, it could last until September 2021, contributing to the rise in Coffee Futures which are up 26% since May 29th 2020 when the price collapsed to 0.96 cents a pound when the 2020 global lock downs for COVID-19 hit supply lines, it is now sitting at a high of $1.62 for the July 2021 futures contract (refer to the chart above).  The persistent inflation spill over since 2020 is also ontop of a reported $10 billion dollar bill, ranging for the mid-size to larger coffee distributors and producers, attributed by transportation backlogs, production, storage and shipping costs as they all begin to rise from the countries who export coffee beans. While these producers try and return to profitable margins, which in turn are battling a challenging exchange rate market by a falling US dollar and, as mentioned, increased production costs.  The issue of Climate Change on the price of coffee has now become an undeniable aspect to not just a cup of brew but also overall food inflation, as the South American drought that began in 2018 has created climate conditions that are not favorable for farming and architectural, more so the greater Brazil region that is the most alarming.

The global pandemic has not only compressed supply chains, with producers trying to get goods out in earnest to cover profit shortfalls of 2020, it has also added to supply bottlenecks that are now becoming a serious issue – missed by Central Bankers that believe overproducing more money will compensate for collapse in profits, simply put, is a toxic thought process in regards to the rising costs most businesses will face and of course at the end of the day an arrogant disposition of an archaic economic thesis.  Overheads will continue to climb and excess money will only be gobbled up with inflation, all in the shadow of an ever mutating virus such as Covid-19, will also be the climate changing. Seen already in various aspects of the food supply, as noted with the maps of the Paraguay River near Asunción (image/s above), a major shipping line is now shrinking due to the South American drought.   Using Coffee as a gauge to how climate can drastically effect food might be worthy of adding to inflation gauges for economic activity, if Brazil truly becomes impacted by the worst drought in 90 years, it maybe a ill omen for all food costs in the near term. Very much becoming a front and center issue for the developed world.