The coffee-drinking world needs another Brazil, the world’s top grower and exporter of the beans, if it’s to avoid a shortage.

Rising consumption, especially in emerging markets, means global production will have to rise by an extra 40 million to 50 million bags of coffee in the next decade, said Andrea Illy, the chairman and chief executive officer of Illycafe SpA, a roaster based in Trieste, Italy. That’s more than the entire crop of Brazil.

Throw in the looming threat of climate change, as well as low prices that are discouraging farmers from increasing output, and you’ve got a potential problem. It’s something producers, government officials and industry representatives are trying to tackle this week at the Global Coffee Forum in Milan.

And:

The world is set for a coffee production deficit of 3.5 million bags in the 2015-16 season that starts on Thursday, Winterthur, Switzerland-based merchant Volcafe said in August. That follows a global shortage of 6.4 million bags the prior year. Brazil’s lastcrop was hurt by the aftermath of a severe drought in 2014 that drove arabica futures in New York up about 50 percent that year. Since the start of 2015, prices have retreated 27 percent as Brazil’s currency plunged against the dollar, boosting the appeal of the South American country’s exports.

Global coffee consumption will increase by a third to 200 million bags by 2030, according to Michael R. Neumann, chairman of board of trustees at Hanns R. Neumann Stiftung, a foundation that’s affiliated with Hamburg-based merchant Neumann Kaffee Gruppe. Production, pegged at 144 million bags this year, may rise to meet consumption for a balanced market in 2030, as long as smallholder farmers can boost productivity by then, he said in a speech Wednesday in Milan.

And:

Arabica coffee, the premium bean that’s used by shops including Starbucks Corp., is most at risk from rising temperatures, Illy said. The robusta variety is more resilient or robust, as its name suggests, he said. Brazil is the largest arabica grower and Vietnam is the biggest producer for robusta. Illy only uses arabica.

Farmers are already making changes to adopt to rising temperatures, said Jean-Marc Duvoisin, CEO of Nestle SA’s Nespresso. The company sources coffee from parts of Latin America, Asia and Africa.

“I visit farms quite often, and the farms are always going higher in the mountains, higher in the mountains," Duvoisin said on a panel on Wednesday. “Warming has a negative impact.” 

David Fuller's view

Prices for most commodities have been under pressure since 2Q 2011, due to increased supply.  We can see this from the Continuous Commodity Index (monthly & weekly) which includes most industrial and agricultural resources and is calculated on the basis of equal weightings.  

Arabica Coffee (monthly & weekly), which is a volatile commodity, is currently oversold after nearly halving in price over the last year.  While a potential recovery candidate, trading activity currently shows little concern over the potential shortage mentioned in the article above.  Robusta Coffee is also oversold and formed an upside weekly key reversal last week, although there has been no upside follow through to date.