No country on Earth puts more breakfasts on kitchen tables than Brazil.
The farms that dot the vast plains and highlands that rise above the Atlantic coast produce four-fifths of the world’s orange juice exports, half of its sugar exports, a third of coffee exports and a third of the soy and corn used to feed egg-laying hens and other livestock.
So when the region’s crops were scorched and then frozen this year by a devastating one-two punch fueled by climate change — the worst drought in a century followed by an unprecedented Antarctic front that repeatedly coated the land in thick frost — global commodity markets shook.
The cost of Arabica beans soared 30% over a six-day stretch in late July; orange juice jumped 20% in three weeks; and sugar hit a four-year high in August.
The price spikes are contributing to a surge in international food inflation — a U.N. index has jumped 33% over the past 12 months — that’s deepening financial hardship in the pandemic and forcing millions of lower-income families to scale back grocery purchases across the globe. What’s more, the episode is sending an ominous warning of what’s to come as scientists anticipate rising global temperatures and declining soil humidity will increasingly wreak havoc on farm lands in Brazil — and much of the rest of the world.
“It’s a vicious cycle,” says Marcelo Seluchi, a meteorologist at Brazil’s Natural Disaster Monitoring and Alert Center. “There is no rain because there is no humidity, and there is no humidity because there is no rain.” Deforestation of the Amazon, which ranchers clear cut to raise cattle and plant crops, is playing a big role, he says. By his calculation, Brazil hasn’t had a normal rainy season since 2010.
“It’s been a very peculiar year,” he says. “Floods in Germany and China, and there’s a very serious drought problem in Brazil.”
There’s also drought across the border in Argentina and in Chile, Canada, Madagascar, Mexico and Russia. The U.S. has been cleaved in two this summer: The West has been ravaged by record heat waves, forest fires and a drought so severe that, like in Brazil, giant lakes and rivers are drying up and straining hydro-electric power; the East, meanwhile, has been drenched by record-setting tropical storms and deadly floods.
“The world is on a very dangerous path,” Seluchi says.
All of this, according to a recent study published in the Journal of Environmental Economics and Management, will lead to a 10% decline in crop yields over the next three decades, a period in which the global population is expected to grow more than one-fifth.
The destruction wrought in Brazil provides a glimpse of that future. Between the drought and the frost, crops on some 1.5 million square kilometers of land have been damaged — an area the size of Peru. The coffee losses are the most stunning: as much as 1.3 billion pounds of beans destroyed, enough to brew every single cup that Americans drink over a four-month period.
This has triggered a frantic rush among the world’s biggest coffee retailers — companies like Starbucks Corp. and Nestle SA — to secure supplies.
“These guys are scrambling pretty hard,” says Jack Scoville, a trader at commodities broker Price Futures Group in Chicago. Starbucks said in a statement that it always buys months in advance, and Mark Schneider, Nestle’s CEO, told investors on a July conference call that the company protected its finances by purchasing hedging contracts that stretch into early next year.
Scoville, though, warned that successfully locking in prices isn’t the same as getting enough coffee over the long term. Brazil’s poor harvest will roil the market for years, he predicts. He’s seeing buyers who normally get all of their beans from Brazil and Vietnam suddenly turn elsewhere to try to make up for shortfalls.
That’s exactly the situation that Bader Olabi, a roaster in Istanbul, finds himself in. He’s hunting for new suppliers in Colombia, India and Africa to replace the 100 containers of beans he gets from Brazil each year. He knows it won’t be easy to convince customers that those coffees are just as good. In Turkey, Olabi says, “Brazilian coffee is the best.”
In Austin, Texas, Greater Goods Coffee Co., a specialty roaster, is planning to raise prices soon to offset the higher cost it had to pay for beans. Sara Gibson, the head roaster, calls it a wake-up call to customers. They’ll have to accept higher bills to help make farming more sustainable in the era of climate change, she says. “That’s my hill to die on.”
Brazil is now predicting its coffee crop will shrink by more than 25% this year. Ground zero for this wipeout was Caconde, a hamlet carved out of the lush hardwood forests of northwestern Sao Paulo state.
Coffee is 80% of the economy here. Stand on top of the highest peak and it’s coffee farms as far as the eye can see. One of them is a tidy, little plot owned by a 70-year-old former banker by the name of Antonio Ribeiro Goulart.