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VOLATILITY IS HERE TO STAY SAYS VERMA

VOLATILITY IS HERE TO STAY SAYS VERMA



Addressing some of the challenges facing the coffee industry in a speech at Sintercafé in November, Vivek Verma from Olam International said the market will be “increasingly volatile” and faces real challenges responding to trends such as demand growth and the effects of climate change.

In his presentation, ‘Securing our future coffee supply chain: a global view,’ Mr Verma, who is Managing Director & CEO Coffee at Olam International, addressed a number of structural trends which, he said, point to a growing imbalance between supply and demand for agricultural commodities as a whole over the long term. Among those he highlighted were population growth pressures and the growing scarcity of arable land due to urbanization, soil erosion and related factors. Others include water scarcity due to climate change (an issue highlighted elsewhere in this issue) and other forms of environmental degradation.

With regard to coffee, Mr Verma highlighted the following key issues: yield growth/ productivity; weather volatility; land suitability; water stress; and availability of labour. He noted that the number of extreme and unpredictable weather events has increased over the last decades, such as the extremely dry weather in Brazil in early 2015. “Coffee may see sudden, unforeseen weather shocks in producing countries leading to price and supply volatility,” he told delegates.

“Average global temperatures are expected to climb by 1.7º C,” he told delegates, “pushing the right altitude for coffee production higher. Models predict that, in Central America as a whole, the optimal coffee-growing elevation will shift from 1,200m above sea level currently to 1,600m by 2050.” This will create a serious challenge for high grown Arabica, he said.

Labour is certainly becoming an issue, he said. “Populations are rapidly aging across the globe and coupled with the global trend towards urbanization and the clear preference of younger generations to city life, finding labour for coffee farming is one of the biggest challenges,” Mr Verma said. “While this is a challenge for all of agriculture it is especially acute for coffee as a large number of farms are smallholder farms and not amenable to corporatization and mechanization. The entire industry – and governments – have to work together to ensure that workers are enticed to work on farms.”

For more information see the January 2016 issue of Coffee & Cocoa International.

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