El Niño could threaten the production of raw materials such as cocoa and coffee beans. Consumers should prepare for higher in-store prices, according to the analyst.
Prices of raw materials such as cocoa and coffee rose after the announcement of the El Niño weather phenomenon. At worst, this could lead to chaos and uncertainty for farmers in South America and Southeast Asia, he writes The Wall Street Journal.
Climate scientists at the National Oceanic and Atmospheric Administration (NOAA) said last week that the weather phenomenon occurred, according to the paper.
El Niño is a periodic climate change associated with changes in the wind pattern in the equatorial part of the Pacific Ocean.
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Weather phenomenon risks leading to more severe weather such as droughts, heavy rains and hurricanes in the countries surrounding the Pacific Ocean.
This could harm, among other things, cocoa and coffee crops for farmers in countries around the equator, according to the WSJ.
Cocoa is more expensive
According to NielsenIQ, cocoa prices are up 14 percent in the past year, he writes CNBC.
Cocoa prices rose to $3,160 a ton, the highest level since May 2016, according to the channel.
– The cocoa market witnessed a significant increase in prices. This season marks the second deficit in a row, Sergey Chetvertakov, an analyst with S&P Global Commodity Insights, tells CNBC.
He expects the El Niño phenomenon to cause a challenge to the cocoa market in the next season as well, which lasts from October this year to September next year, and estimates that prices will continue to rise.
– I think that the consumer should prepare for the possibility of higher prices for chocolate, says Chetvertakov.
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Elisabeth Andestad-Ekim, Orkla’s director of communications, wrote in an email to E24 that they are getting what they need to produce chocolate at the Nidar factory in Trondheim.
– Despite the fluctuations in cocoa crops, we have good access, as you wrote.
Ekim writes that it is difficult to predict whether fluctuations in raw material prices affect production and the price level in Norway in general.
It may have consequences for access and price
Last week, the price of Robusta coffee rose to its highest level since 2008, as an El Niño phenomenon raises supply concerns for the coffee bean, according to bloomberg.
Just since the new year, the price of Robusta, which is used in instant coffee and espresso, has increased by 50 percent, as supplies have not kept up with demand.
Futures contracts in London rose this week to more than $2,800 a ton, covering contracts for Robusta coffee delivery in July, according to Investing.com.
It is also the highest price since these contracts were introduced 15 years ago.
according to Norwegian coffee information Arabica is the most widely used type of coffee in Norway. Robusta has become more popular around the world in recent years, because it is cheaper and has a higher caffeine content than Arabica.
Kine Søyland, director of communications at Norgesgruppen, says there is no simple answer to how quickly changes in raw material prices will affect the retail price of coffee in Norway.
Norgesgruppen owns coffee producer Joh. Johansson Café, which has brands like Evergood and Ali Kaffe.
– Weather phenomena such as El Niño or other extreme weather events affect coffee crops in affected countries and thus access to raw materials and, of course, also price. Most of the coffee that our coffee business imports and produces comes from Brazil, Vietnam and Colombia, says Sweland, so if crops are affected here, that could have consequences for us as well.
Climate change will present challenges
For many years they have seen that the areas of land in the world suitable for growing coffee have come under pressure due to climate change, says Celine Huseppe, Communications Director of Nestlé Norway.
– It is particularly large temperature fluctuations that cause an unstable cycle for coffee plants, says Husseppe.
Nestlé is one of the world’s largest coffee producers and importers.
– Climate change is expected to pose even greater challenges in the coming years, and global warming is supposed to reduce the amount of land suitable for coffee cultivation by up to 50 percent by 2050, says Husepe.
Søyland at Norway Group also points out that the economic situation with currency fluctuations, inflation and increasing costs also affects the prices of the coffee they buy.
– Now coffee is still a relatively affordable product here at home, considering how many cups of coffee you get from a bag of coffee, but there is no product on the market now that isn’t affected by the price hike. You also see that coffee sales in Norway are down somewhat when we look at the development so far this year, she says.
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