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Uh oh! Your coffee could cost you double!

March 3, 2014 (No Comments)

Here’s why there could be a huge price hike.

If you suddenly find yourself paying double for your morning cup of coffee, the reason for the price hike is the drought in Brazil…

January saw a heatwave spread across Brazil, making it the hottest and driest month on record in much of the country’s southeast. More than 140 cities in Brazil have been forced to ration water, and newspapers reported that some districts are receiving water only every three days. The heat and ensuing drought has also destroyed many of the country’s crops, including its coffee.

Brazil supplies the bulk of the world’s coffee – it produces over 43.5 million bags a year, double what the world’s second largest producer Vietnam does. Check out this map showing where the world’s coffee comes from here.

So far, the price of coffee has increased more than 50% this year. There is a very real chance that the price increase will eventually be passed on to us at our local cafes.

The decrease in supply comes at a time when coffee demand is growing – as coffee-lovers in countries like India and China become connoisseurs of the cafe latte and short black, the amount of coffee required to keep the world caffeinated will only increase.

Meanwhile, there’s a drought in Australia too. While it might not affect your grocery bill just yet, it is making life harder for plenty of our fellow Australians. This week Australian PM Tony Abbott announced a drought assistance package worth $320m would be delivered to farmers to help them cope.

The majority of the drought assistance package will provide $280 million to “hundreds” of farmers to access five-year concessional loans at a rate of four per cent, up to the value of $1 million.

A portion will also go towards helping with the delivery of social support services, including access to mental health support – the rate of rural suicide in Australia is among the highest in the world.

The National Farmers Federation chief Matt Linnegar welcomed the drought assistance package, but said a longer-term vision for drought resilience was still needed.

coffee price drought

As if all of that’s not scary enough, all of this takes places against a global backdrop of declining supplies of groundwater, the freshwater ‘backup’ in times of low rainfall. A recent report in the US confirmed declining groundwater levels there. In China, more than half the proposed coal-fired power stations are expected to be built in areas already under high water stress, which will deplete groundwater levels further. Over the last decade, groundwater was pumped out 70% faster than in the 1990s, mainly for agriculture and mining.

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