Brazil drought drives up coffee prices: will Rwanda benefit?

It has often been said that opportunity meets the prepared. Rwanda is slated to see an upturn in coffee prices as global Arabica roasters turn to Africa for a fix. Last year ended with low prices for coffee farmers in Rwanda, dashing hopes of profiting from the trade for many.

Since February experts have seen coffee prices on the international market rallying upwards, driven by one the hottest and driest summers in Brazil’s history. Over the last month or so, large parts of the South American republic have experienced the lowest rainfall they have seen since the 1940s. Specialists have issued warnings that the drought could damage the growing coffee cherries, and also stunt the growth of trees ahead of the next season.

Bean supplies are estimated to be about 5 million bags lower than consumption in the 2014-15 seasons, the coffee unit of commodities trader ED&F Man Holdings Ltd has predicted. Growers in Brazil will gather 51 million bags in the 2014-15 crops, said Winterthur, Switzerland-based Volcafe. That’s below production potential of 60 million bags, compared to 57.2 million bags in 2013-14 and 56.8 million bags a year earlier, data from the trader showed.

“With a 51 million-bag Brazil crop figure, our 2014-15 statistical balance becomes a deficit of around 5 million bags, coming after two years of statistical surplus in 2012-13 and 2013-14,” Volcafe said in a report.

As a consequence of the shortfall, demand for Arabica coffee is set to rise and prices will likely continue to steadily climb in this coffee season.  But Brazil’s misfortune heralds a possible fortune for Africa. Rwanda, being one of few countries growing Arabica and producing specialty coffee, could benefit from the current rise in coffee prices on the global market if farmers prepare well.

In 2014 SNV will upscale its work in the coffee sector through the implementation of the turnaround program in coffee cooperatives, in partnership with NAEB and IFAD. The programme seeks to take on 25 new Coffee Washing Stations and pull them from the red zone to profitability through links to finance, markets and improved governance. The project will also facilitate in creation of 20 new cooperatives in new coffee zones in Rwanda.  This is in addition to the 31 cooperatives currently supported by SNV.  Coffee is the third largest export  commodity whose income benefits 69,000 Famers.