In 2021, the price of coffee beans soared by nearly 80% Industry insiders shouted: This year will rise! Starbucks (SBUX. CAN US) be okay?

One of the world's largest coffee traders expects a supply shortage in the coming year as drought and frost cut production and production potential in Brazil, one of the world's largest coffee bean producers.

Volcafe Ltd., a coffee subsidiary of well-known commodity trader ED&F Man, said in a quarterly report that global coffee production is expected to decrease by 1.4 million bags during the coffee season that began in October last year, and supply will outstrip demand in the future. Prior to that, Volcafe said there was a record shortage of 11.2 million bags in the current statistical quarter.

Volcafe expects the shortage to be caused by insufficient production in Brazil, a major coffee producer, where the Brazilian Arabica coffee bean crop could yield 17 percent less than previously expected. Coffee trading prices in the market are likely to climb after surging nearly 80 percent last year, when coffee prices rose the most annual increase since 2010.

A recent survey conducted by Volcafe revealed that Brazil has the potential to produce 37.5 million bags of Arabica coffee beans, which is Starbucks (SBUX. US) favored mild coffee beans, but significantly lower than the projected production of 45 million bags forecast in September last year. Volcafe said it also means that from 2020-2021, the production volume of the Brazilian Arabica tree that last entered a high-yield two-year cycle fell by about 30%, and production may decline again in 2022.

Brazil's lower-than-expected coffee production prevents downstream merchants from increasing their coffee bean inventories, which tend to occur during high-volume cycles, the report said.

Starbucks can't stand it either?

As mentioned above, Arabica coffee beans are starbucks' favorite coffee bean varieties, and the natural demand is huge, but in the face of this sharp increase in the price of this raw material, Starbucks seems to be forced to raise the price of Poly.

It is understood that some time ago, the media reported that Starbucks South Korea raised the price of 46 drinks by 100 to 400 won (about 0.53 yuan to 2.12 yuan) from the 13th, and the price increased again after 7 and a half years. Starbucks said that the recent rise in the price of various raw materials such as coffee beans, coupled with the rise in international logistics costs under the new crown epidemic, decided to increase the price of some drinks.

Since the beginning of this year, Starbucks shares have fallen by 17.18%, and fell 0.88% to $96.870 yesterday.

According to statistics, the benchmark for global coffee prices, the price of C-type coffee futures in the United States, has risen by more than 90% since January 20 last year.

Volcafe said in the report that the market now needs to rely on other coffee producing countries to increase supply and meet further demand growth, as it remains in doubt whether the market can maintain a third structural deficit peak season in 2023-2024.

According to Volcafe's forecasts, coffee consumption is expected to grow by only 1% in 2021-2022 and only 0.7% in the next peak season, down from the previous forecast of 1.5%. Volcafe said that to meet the growing demand in the market, the production of other coffee beans in addition to Arabica coffee beans also needs to increase, which also means that more cheaper and more bitter Robusta varieties need to be added to the mixed coffee.