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El Niño Guide for the Coffee Market – Part 2

Part 2 - El Niño Impact on Coffee Production


The influence of El Niño on coffee production has a range of effects, spanning from minor impacts to severe consequences. To determine what the impact on crops will be requires a comprehensive analysis of both the geographical impact zones and the characteristics of the El Niño event itself.

In this second part of our El Niño’s blog series, we will provide a detailed exploration of the distinct repercussions of El Niño on the different coffee origins worldwide, as well as some of the most relevant occurrences in history for the coffee market.





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Vietnam & Indonesia


The East Asian Robusta powerhouses are typically the ones most strongly influenced by El Niño. The weather phenomena contribute to rainfall reduction and therefore dryness potential in these areas. The El Niño peak usually takes place during the Jun-Jan timeframe, which coincides with the crucial blooming phase for Indonesia and cherry growth for Vietnam, periods that notably require rain.





Therefore, El Niño holds a potential of presenting significant challenges to crop development, by limiting or even undermining productive capacity if dry weather is persistent, such as in years of strong El Niño events (more on this later). As discussed in the 1st part of this blog series, the proximity of East Asia (including Vietnam and Indonesia) to the heart of the El Niño in the east Pacific is a critical factor.

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Notably, Vietnam has crop irrigation as a strength, which acts as a mitigating factor against El Niño-induced dryness. However, prolonged dry weather can lower water levels in reservoirs, potentially leading the government to impose water restrictions. Furthermore, history suggests that irrigation hasn’t kept the coffee crop fully shielded from the effects of El Niño.

Brazil


Brazil is the key producing origin when it comes to coffee, so it is important that we pay attention to this region. However, while El Niño doesn’t create a distinct pattern of rainfall across these coffee-growing regions, it is worth noting that there is a moderate upswing in average temperatures particularly evident in Brazil.


This is particularly important because of the risk of frost in Brazil. During El Niño years, Brazil coffee production may actually benefit as the risk of frost occurrence in Brazil appears to be mitigated. Coincidently or not, we are currently in a year of El Niño, while winter in Brazil has passed its peak with no frosts or even any noteworthy alerts.




Central America & Mexico


The effect on coffee production in Central America is mixed. Some analyses indicate that the southern portions of Central America are at risk of increased dryness, while others show little effect.


However, a positive effect of El Niño is that this weather event may reduce the likelihood of hurricane formation near the Central America coffee regions. Since El Niño strengthens the Jet Stream, the formation of hurricanes is diminished because it is harder for them to sustain their typical structures in the Atlantic, as the wind shears generated by the strengthening Jet Stream often disrupt hurricane formations in their early stages.


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Notably, hurricanes are frequently associated with the occurrence of floods within the coffee-growing regions of Central America during the Jun-Nov period. However, historical records do not demonstrate a strong correlation between major changes in the Central American rainfall patterns amidst El Niño events. Furthermore, the meteorological maps depicting El Niño's impact fail to reveal a distinct area of influence over the coffee-growing areas in Central America or Mexico.

Colombia


There isn’t strong statistical evidence showing El Niño significantly disrupting Colombia's coffee production. However, El Niño tends to bring about dry weather and elevated temperatures during the later phases of the main crop cherry growth as well as during the initial stages of mid-crop flowering. These are typically periods of regular rain so it can be problematic. Fortunately, Colombia's soil is renowned for its moisture retention capability, and so it’s arguable that this characteristic provides some resilience to the potential effects of El Niño.





Looking to an historical example, the 2015 El Niño event (which was very strong) had a relatively minimal impact on production in Colombia. Generally speaking, however, consistent dryness from June to December could pose a concern, particularly for the flowering period of the Mitaca crop. Although the effects don’t appear to be widespread, it’s possible that certain regions in Colombia might experience limitations on their productive potential.


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East Africa


El Niño can increase rainfall through the Oct-Jan period in East Africa (since the ITCZ is inverted), which coincides with what should be the dry season there. Therefore, risk of flooding and landslides, especially in Uganda, can compromise bean quality during the harvest period (sun dry process) and/or delay harvest works. However, looking back at production data against El Niño occurrences, we don’t see a significant correlation that would imply El Niño is a major threat to East Africa coffee production.

For instance, even during the 2015 El Niño event, which was accompanied by warnings of risks to Uganda's coffee production, the feared crop damage did not actually manifest. In fact, production increased rather than declining. Other origins, such as Ethiopia and Kenya are also relatively neutral as to the effects of El Niño (in terms of production potential), while the Ivory Coast, a small origin (1-2m bags) located in West Africa, is outside El Niño’s scope of influence.






Historical El Niño Occurrences in Coffee Origins


Certain historical El Niño events stand out due to their evident detrimental impacts on coffee production. These events were notably intense and had their impacts concentrated on the key Robusta-producing countries Vietnam and Indonesia.


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Vietnam Retrospect


In 2006-2007, an El Niño event of strong magnitude emerged, causing a notable disturbance in the previously upward trajectory of production in Vietnam. During this period, total output reduced by ~2.5m bags YoY, in part due to the prevailing dry conditions.

Another instance of substantial disruption occurred during the El Niño event of 2015-2016. Once again, the presence of a strong El Niño led to overall dry weather conditions that had an adverse effect on yield in Vietnam. The consequences were tangible, resulting in a reduction of 2.2m bags during the period.







Indonesia Retrospect


During the years 1997-1998, Indonesia faced what would be recognized as one of the most potent El Niño events ever documented. Vietnam was spared the misfortune of having its producing cut, but the impact (from dryness) was felt intensely in Indonesia, as it led to a substantial reduction in coffee production. Approximately 1.1m bags (~15% of total crop) of coffee were lost during the period.


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Moving forward to the 2015-2016 El Niño, dryness swept through the region again, exerting a powerful downwards pressure on production, which experienced a sizable downturn, declining by approximately 1.7m bags, (roughly 13% of the total output) during that time span.




Conclusions


El Niño events produce influence in rainfall patterns of coffee producing countries, but the historical track record suggests that strong category events are required to establish a negative impact on coffee production. Negative effects are more concentrated in Robusta producing origins Vietnam and Indonesia rather than the Arabica ones by historical standards, given the geographic proximity to El Niño’s center.

Apparently, weak-to-mild El Niño events do not tend to produce notoriously negative or disastrous effects to the worldwide coffee crops, and dry conditions can often be managed through irrigation in Vietnam. Still, one must consider possible volatile events in the coffee market, contingent upon the way El Niño is understood as a risk.


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