WEBVTT - Why Record Coffee Prices Are A Double Edged Sword For Farmers

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news, Coffee Taste.

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<v Speaker 2>Every flavor, Old Coffee, buy Experts for experts. It's the

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<v Speaker 2>world's most popular drink, but it's not getting any cheaper.

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<v Speaker 2>Coffee Buyers are paying record prices for the Crown coffee

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<v Speaker 2>prices and Robusta hiasins the nineteen seventies.

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<v Speaker 3>We are going to still consuming a cup of coffee

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<v Speaker 3>every morning, almost no matter what the price is.

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<v Speaker 2>In Uganda, farmers received a record seven thousand shillings per

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<v Speaker 2>kilo of robusta beans. That's around one dollar and eighty

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<v Speaker 2>nine cents. But it's not all good news. This windfall

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<v Speaker 2>comes at a time of a cost of living crisis

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<v Speaker 2>and has made the farms an obvious target for criminals.

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<v Speaker 2>They're using dogs to guard plantations, they're using bees.

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<v Speaker 4>This is two stop thieves from snatching those unharvested beans

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<v Speaker 4>straight from the trees under the cover of darkness.

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<v Speaker 2>On today's Next Africa Podcast, we'll look at the impact

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<v Speaker 2>the rising cost of coffee is having and whether this

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<v Speaker 2>unprecedented crime wave is actually here to stay. I'm Jennifer

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<v Speaker 2>Zabasajob and this is the Next Africa Podcast.

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<v Speaker 4>Bringing you one story each week from.

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<v Speaker 2>The continent, driving the future of global growth with the

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<v Speaker 2>context only Bloomberg can provide. So joining us on the

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<v Speaker 2>podcast this week is Mumby Guitao. She is a soft

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<v Speaker 2>commodities reporter covering all things commodities globally.

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<v Speaker 4>Mumby, how are you? Thanks for joining us.

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<v Speaker 1>I'm very well. Thank you for having me.

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<v Speaker 2>Yeah, it's been a busy year for you, I think,

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<v Speaker 2>to say the least, we were just talking about how

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<v Speaker 2>it started off with coco for you. Now it's coffee

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<v Speaker 2>maybe pink the picture for us right now, about what

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<v Speaker 2>exactly is going on and what we should focus on

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<v Speaker 2>when it comes to coffee right now.

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<v Speaker 1>It's been an interesting market for me. As you said,

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<v Speaker 1>we started off with the cocoradi and then we've moved

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<v Speaker 1>on to the coffee market. And it's important to know

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<v Speaker 1>that these are all the luxurious things that everyone of

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<v Speaker 1>us likes to have. Every once in a while, the

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<v Speaker 1>coffee market has seen significant weather challenges, particularly in Vietnam.

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<v Speaker 1>So we have two types of coffee. We have the

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<v Speaker 1>robusta and we also have the Arabica beans. The Arabica

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<v Speaker 1>beans are what we consider the premium, smooth, flavored beans

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<v Speaker 1>that are favored by the likes of Starbucks or probably

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<v Speaker 1>your favorite coffee chain. And then we have the likes

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<v Speaker 1>of robusta beans, which is considered cheaper and considered a

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<v Speaker 1>little more acidic, but has a higher caffeine content. Now

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<v Speaker 1>the shock that we've seen in supply is in robusta beans.

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<v Speaker 1>Vietnam is the largest producer of these beans, and earlier

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<v Speaker 1>this year they had bad weather, so we've seen production

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<v Speaker 1>in that country go down.

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<v Speaker 4>This year.

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<v Speaker 1>We started with robusta beans at about two seven hundred

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<v Speaker 1>dollars and right now we are looking at five three

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<v Speaker 1>hundred dollars, so that has been about an eight two

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<v Speaker 1>percent increase introbusta beans. That has made coffee very expensive,

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<v Speaker 1>especially the instant type or your blends that are used

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<v Speaker 1>in espressos. So that's why you think probably the cost

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<v Speaker 1>of your coffee go up this year.

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<v Speaker 2>And maybe not to put you on the spot, but

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<v Speaker 2>I do remember when we talked about cocoa. You don't

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<v Speaker 2>necessarily consume coco too much when it comes to coffee.

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<v Speaker 2>I mean, is this a mumby favorite or are you

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<v Speaker 2>just very interested in covering it?

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<v Speaker 1>I hate to say, but I'm more of a tea drinker.

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<v Speaker 1>I'm trying to get into coffee just so that I

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<v Speaker 1>know how to taste and identify good coffee. But I

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<v Speaker 1>like my tea, But I'm now starting to get into coffee.

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<v Speaker 1>But I'm not those coffee snobs that won't take a

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<v Speaker 1>particular type of coffee.

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<v Speaker 2>And I think all of us know coffee is very

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<v Speaker 2>precious to people, right and the taste and where it

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<v Speaker 2>comes from. And so maybe you touched a bit there

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<v Speaker 2>on some of the biggest growers globally, maybe you can

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<v Speaker 2>tell us more about that where are these beans coming

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<v Speaker 2>from that people are willing to spend a lot of

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<v Speaker 2>money to get their cup of coffee.

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<v Speaker 1>Initially, as I mentioned, Vietnam is our biggest producer of

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<v Speaker 1>robusta beans, but globally, Brazil is the biggest producer of

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<v Speaker 1>both Arabica and Robusta beans, so cumulatively it's the biggest

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<v Speaker 1>exporter and producer of coffee beans. But we also have

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<v Speaker 1>the likes of Ethiopia, Uganda, Indonesia, India, Columbia, Honduras, which

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<v Speaker 1>are also very important to the supply of coffee in

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<v Speaker 1>the world. But most times we pay a lot of

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<v Speaker 1>attention to what is happening in Brazil and what is

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<v Speaker 1>happening in Vietnam, and.

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<v Speaker 2>So then what was the catalyst to where we are now,

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<v Speaker 2>to where we're seeing prices future prices at levels we

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<v Speaker 2>haven't seen in quite a while, and that's with both

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<v Speaker 2>of these beans.

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<v Speaker 1>Yes, so initially it started with Robusta. That's where we

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<v Speaker 1>saw the first shock. It was not widely anticipated that

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<v Speaker 1>we would have lower production in Vietnam, but they had

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<v Speaker 1>bad weather, they had dropt, and then that obviously led

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<v Speaker 1>to a decline in production, and that's kept the market

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<v Speaker 1>quite heated, and even this year, we're expecting the country

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<v Speaker 1>to get even less production because they had dropped earlier

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<v Speaker 1>in the year. Now the world is now paying so

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<v Speaker 1>much more attention to Brazil, where there's also dry weather

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<v Speaker 1>and the trees that are meant to be flowering, but

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<v Speaker 1>the rain is not coming down yet. So anything that

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<v Speaker 1>is weather related causes the market to be on the edge,

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<v Speaker 1>and the market is very sensitive to dry weather, to frost,

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<v Speaker 1>to lots of rain. So that's why we are seeing

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<v Speaker 1>the market rarely to thirteen year highs for Arabica and Robasta,

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<v Speaker 1>to records that we've not seen since the nineteen seventies.

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<v Speaker 2>Wow, And I wonder, as somebody who's covering this closely,

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<v Speaker 2>what's been your perspective and watching these prices continually tick up?

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<v Speaker 2>It was it inevitable just given a lot of the

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<v Speaker 2>weather related events that we've been seeing.

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<v Speaker 1>Some of it was inevitable because it's hard to predict

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<v Speaker 1>the weather. I think that's one of the things that's

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<v Speaker 1>very hard to predicting this life. So in one week

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<v Speaker 1>we are looking at a frost, the other week we

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<v Speaker 1>are looking at heat waves. The other week we are

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<v Speaker 1>looking at possible typhoons or drought. In one region, the

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<v Speaker 1>weather has been oscillating between two extremes, and that's always

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<v Speaker 1>very hard to predict how a crop will behave if

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<v Speaker 1>it's in every coast and Ghana where we have coco,

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<v Speaker 1>too much rain is bad, but very hot weather is

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<v Speaker 1>also bad. So plants require such a delicate balance of

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<v Speaker 1>just optimum weather, and if that is not available, then

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<v Speaker 1>we have the supply shocks that we are seeing currently.

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<v Speaker 2>And before we go to the break, maybe you can

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<v Speaker 2>explain how you're mentioning how this affects producers.

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<v Speaker 4>How does this then trickle down to the consumer.

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<v Speaker 2>Is it that a lot of these buyers are just

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<v Speaker 2>increasing their prices because the supply is just so limited.

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<v Speaker 1>Yes, it starts with the farmers. So when farmers realize

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<v Speaker 1>that there's competition for their beings, they start to raise

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<v Speaker 1>their prices, and even among traders, they also start to

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<v Speaker 1>bit among each other. So it's the highest builder that

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<v Speaker 1>gets the bins, that helps to fuel prices higher and

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<v Speaker 1>higher every day. And I think that's good for the farmer,

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<v Speaker 1>especially in an era where they've not been getting as

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<v Speaker 1>much money for their beans. But for the consumer that

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<v Speaker 1>just means spending more dollars and more pounds for your

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<v Speaker 1>cup of coffee. In the long run, I think the

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<v Speaker 1>issue has been to ensure that farmers are fairly remunerated

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<v Speaker 1>for their amount of work that they put in the fields.

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<v Speaker 1>Tending to a coffee plantation is not easy, picking the

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<v Speaker 1>cherries taking them to the washing station. So farmers have

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<v Speaker 1>always been saying, we need a fair price, and maybe

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<v Speaker 1>the rallying prices helps them get part of that fair price.

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<v Speaker 4>Stick with us Mumbai.

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<v Speaker 2>After the break, we'll talk more about how these rising

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<v Speaker 2>prices are affecting farmers and growers on the ground in Africa.

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<v Speaker 4>We'll be right back and welcome back.

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<v Speaker 2>We still have Mumbaiker tow Bloomberg Soft Commodities reporter joining

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<v Speaker 2>us to talk all things coffee and coffee crops. So

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<v Speaker 2>maybe we were talking a little bit about the global

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<v Speaker 2>producers before the break, but you mentioned some of the

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<v Speaker 2>African producers and in particular how what we're seeing right

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<v Speaker 2>now is affecting them. Can you dig more into that

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<v Speaker 2>and where we're seeing this really have an impact on

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<v Speaker 2>coffee farmers.

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<v Speaker 1>So when we saw earlier in the year that Vietnam

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<v Speaker 1>was not giving as much supply as the world needed,

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<v Speaker 1>a lot of attention started also to shift to Uganda,

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<v Speaker 1>which is also coming up as a powerhouse in terms

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<v Speaker 1>of coffee production. It's coffee production has gone up increasingly

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<v Speaker 1>higher every single year and so it was very helpful

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<v Speaker 1>for it to come and plug the short fall. But

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<v Speaker 1>that did not mean that prices were going to fall

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<v Speaker 1>that much lower. So we saw farmers in Uganda and

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<v Speaker 1>exporters in Uganda shipping a lot more coffee to Europe,

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<v Speaker 1>to the Middle East, to the Americas, and that way

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<v Speaker 1>they helped to ensure that the shortfall so from Vietnam

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<v Speaker 1>was being fulfilled.

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<v Speaker 2>And in New Ganda there's an interesting picture that's being

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<v Speaker 2>painted there. We actually talked to our reporter fred O Jambo,

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<v Speaker 2>who is based in Kampala, and he told us in

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<v Speaker 2>particular what the farmers there are having to resort to

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<v Speaker 2>just as the prices continue to take up.

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<v Speaker 3>Farmers say that their farms are targeted because of the

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<v Speaker 3>high prices and they resorted to guarding their farms to

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<v Speaker 3>avoid being victims to the thefts of cherries from their farms.

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<v Speaker 3>Some of the methods they are using employing logs others

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<v Speaker 3>into a pierae, although this one is meant to enhance

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<v Speaker 3>pollination of the prop but they added that it could

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<v Speaker 3>scare away thieves who use the couple of darkness drop

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<v Speaker 3>their crop, so they say they may fear to antigolize

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<v Speaker 3>the bees.

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<v Speaker 5>Is the coursern. It takes a lot of money higher

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<v Speaker 5>gods to God. But some of them have resorted to

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<v Speaker 5>working up occasionally during the night scout around their farms

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<v Speaker 5>which are at their backyards.

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<v Speaker 1>I think from my days when I was in Kenya,

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<v Speaker 1>I used to see how excited coffee and tea farmers

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<v Speaker 1>used to be when they get their pay, and I

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<v Speaker 1>imagine that's the same case for Uganda farmers, they're seeing

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<v Speaker 1>prices that they've probably not seen in their lifetime. They're

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<v Speaker 1>getting a lot more money for their coffee, and that's

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<v Speaker 1>incentivizing crime. So if you see that your neighbor is

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<v Speaker 1>earning a lot more from coffee, and you probably do

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<v Speaker 1>not own a coffee plantation, then you might be incentivized

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<v Speaker 1>to walking there in the middle of the night. Pluck

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<v Speaker 1>a future is go drive them and then sell them

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<v Speaker 1>to the highest speeder.

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<v Speaker 2>And we know that coffee beans, mambe are not the

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<v Speaker 2>only only craft that's been targeted for food crime, especially globally.

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<v Speaker 2>I mean, is there anything that we know just based

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<v Speaker 2>on your own reporting, that people are doing to prevent

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<v Speaker 2>this from happening.

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<v Speaker 5>You're right.

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<v Speaker 1>So early in the year we also covered about thefts

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<v Speaker 1>of cocoa in the West Africa region. At the time,

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<v Speaker 1>prices had also rallied to eleven thousand dollars a time,

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<v Speaker 1>and that also incentivized the kind of theft that you're

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<v Speaker 1>seeing in Uganda. I have seen most government as communities

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<v Speaker 1>to form patrols to try and ensure security in their areas.

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<v Speaker 1>There's very little that a government can do apart from

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<v Speaker 1>trying increase policing activities and patrols in the area, because

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<v Speaker 1>remember some of these farms are not fenced, so they're

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<v Speaker 1>very open, so they're open to any trust persons to

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<v Speaker 1>come in and out. But I think community patrols and

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<v Speaker 1>the government giving them access to more patrols that might

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<v Speaker 1>be helpful for them.

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<v Speaker 2>And in Uganda were also seeing bees even getting into

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<v Speaker 2>the next to helping esport thieves. What does all of

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<v Speaker 2>this mean then there's this win fall here today for

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<v Speaker 2>some of these African countries and especially you mentioned that

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<v Speaker 2>you've is trying.

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<v Speaker 4>To be a powerhouse.

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<v Speaker 2>Is it possible considering the situation they're dealt with.

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<v Speaker 1>I think as long as we are still facing whether

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<v Speaker 1>related challenges, farmers may continue to earn a lot more.

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<v Speaker 1>It's hard for these prices to come off the highs

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<v Speaker 1>that they're at without and significant supply rebound. Now we've

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<v Speaker 1>been going from one year of bad weather, one year

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<v Speaker 1>of bad weather, to another year of bad weather. So

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<v Speaker 1>we've had consecutive years of bad weather so much that

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<v Speaker 1>we are not replenishing the stocks that we are slowly

0:12:33.360 --> 0:12:37.360
<v Speaker 1>tapping into. So for the seeable future, prices could stay high,

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<v Speaker 1>will they rarely continue? I think that's all dependent on

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<v Speaker 1>the weather, whether it's favorable or not. But at least

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<v Speaker 1>for now prices are likely to stay high.

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<v Speaker 2>And mumbe, just finally, what's the next commodity to watch for?

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<v Speaker 2>Just considering, I mean, weather is affecting so many different crops.

0:12:54.000 --> 0:12:56.160
<v Speaker 2>I mean, I wonder what you've got your eye on next.

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<v Speaker 1>My eyes are actually on sugar because Brazil is also

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<v Speaker 1>the biggest producer of sugar, and we've seen fires in

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<v Speaker 1>the region, dry weather in the region, and that's impacting

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<v Speaker 1>sugar production. Just yesterday we saw prices go back to

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<v Speaker 1>levels that we last so in April. So road sugar

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<v Speaker 1>is an important one for us to what now. Africa

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<v Speaker 1>is not the biggest producer of roach sugar. Actually it's

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<v Speaker 1>a net importer. So if prices of road sugar sad

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<v Speaker 1>in other parts of the world, then Africa will probably

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<v Speaker 1>have a higher import bill when it comes to importing sugar,

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<v Speaker 1>and they'll have more expensive sugar going.

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<v Speaker 2>Forward, just at a time when they're hoping inflation to ease.

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<v Speaker 2>Mumbig Guitar Bloomberg's oft Commodities reporter leb.

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<v Speaker 4>Be always great to get you on. Thank you so

0:13:40.640 --> 0:13:41.520
<v Speaker 4>much for your reporting.

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<v Speaker 2>Thank you, and you can read all the latest on

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<v Speaker 2>the price of coffee across Bloomberg News platforms. Now we'll

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<v Speaker 2>also put a link to Fred's reporting in the show notes.

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<v Speaker 2>Now here's a few other stories in the region that

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<v Speaker 2>we're watching. Historic rainfall bucket it down in Central Europe, Africa, Hi,

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<v Speaker 2>and the US Carolinas. This week, at least one thousand

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<v Speaker 2>people have died in Africa.

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<v Speaker 4>And millions of people have been displaced.

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<v Speaker 2>Also, the South African Reserve Bank joined the Federal Reserve

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<v Speaker 2>and other central banks globally cutting interest rates for the

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<v Speaker 2>first time in years as inflation eases across their economies.

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<v Speaker 2>And you can follow these stories across Bloomberg, including the

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<v Speaker 2>Next African Newsletter. We'll also put a link to that

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<v Speaker 2>in the show notes. This program was produced by Adrian Bradley.

0:14:32.680 --> 0:14:35.320
<v Speaker 2>Don't forget to follow and review this show wherever you

0:14:35.400 --> 0:14:39.680
<v Speaker 2>usually get your podcasts. I'm Jennifer's Abasaja. Thanks for listening.