The old empires of cocoa, coffee and tea are fragile

News

Unlock the Editor’s Digest for free

I popped into Sainsbury’s this week to buy tea bags. It took some time out of my working day, but I had read of potential shortages and my family hates to run out of tea. It turned out to be a false alarm: the supermarket’s shelves were packed with boxes of the stuff, from PG Tips to Twinings and Tetley Tea.

Tetley admitted last week that its stock of tea was “much tighter than we would like it to be” because vessels sailing through the Red Sea are being attacked by Houthi rebels protesting the Israel-Hamas war in Gaza. There is little problem of production in India or Kenya, but tea is taking longer to arrive as container ships are diverted away from the Suez Canal and around the Cape of Good Hope.

My trip was self-defeating, given that supermarkets tend to run out of stock more when shoppers panic than because of endemic shortages. But we have been made jumpy by the pandemic and the supply chain inflation that followed. I used to be confident that tea, coffee, rice and cereals would be there without fail but it now takes discipline to remain calm.

Cocoa could be next. The price of cocoa powder and hot chocolate in UK shops rose 25 per cent in the year to January (more than confectionery). Cocoa futures are at record levels because West Africa, from where most cocoa comes, has been affected by extreme weather and crop disease. Many of the 6mn small farmers who tend cacao trees globally face hardship.

The cost of food and drink has increased sharply in general but the disruption to cocoa, coffee and tea is especially instructive. These beverages were early products of empire and the trade routes established by the British East India Company and other merchant adventurers. They were first enjoyed as exotic luxuries in the 17th century, then gradually became part of everyday life at home and work.

The strains are emblematic of the fragility of globalisation and the smooth production and transport of consumer products from the global south to Europe and the US. Arabica coffee is back in surplus after a price spike in 2021 due to drought and frost in Brazil, but lower grade robusta beans from Vietnam are in short supply, not helped by the troubles in the Red Sea.

There is an irony in tea being transported the long way around Africa, rather than via the Suez Canal. It was the opening of the canal in 1869 that put an end to the “tea races” of clipper sailing ships such as the Cutty Sark to bring tea supplies from China to the west as rapidly as possible. As soon as steam ships could cut thousands of miles off the journey, sailing became redundant.

Victorians used to celebrate the arrival of new tea from Shanghai in London and prices would drop as the clippers docked. There is less excitement about refreshment now: a tea bag is a tea bag and it is easy to forget how far processed leaves in branded packets have come. What was an adventure has turned into a routine bit of logistics.

But it is time to wake up and smell the coffee. The Suez Canal will probably be able to resume normal operations in time, but a vital trade route will remain a tempting target for attackers. The Panama Canal has also had to limit passages, in its case because of drought. It is getting hard to ensure safe and easy navigation for ships that have been loaded with products for our consumption.

It is also more difficult to fill up those vessels without fail. Agricultural commodities were always volatile, with good growing seasons one year and failures the next. But climate change increases the risks and is making it difficult for farmers and farm workers to earn a consistent living. They have less capital to invest in trees and bushes, and less reason to carry on trying.

Cocoa is suffering the effects. It was originally consumed as a drink in England until the 19th century turn to solid chocolate. Higher cocoa prices presage the same impact on confectionery later this year. Growing conditions have been so problematic in countries such as Ghana and Nigeria that farmers cannot harvest enough cocoa pods from their trees to be processed into butter for chocolate makers. 

Hedge funds have not been helping by speculating on even higher cocoa prices, but the underlying crisis is real. Even well-meaning measures can have unintended effects: a new EU law meant to discourage deforestation could lead to the destruction of coffee and cocoa being stored in European warehouses. The intention is laudable but the consequences may be perverse for vulnerable African growers.

Few brands that sell these products now ignore such things: every box of tea bags in Sainsbury’s bore a logo from an organisation such as Fairtrade or the Rainforest Alliance. They make more effort than before to ensure that life is sustainable for growers and plantation workers on whose efforts they, and we shoppers, depend.

But the old empires of coffee, cocoa and tea are getting fragile amid climate change and the interruption of global trade routes. The price of their weakness is already becoming obvious, and the supermarket shelves may not always stay full.

john.gapper@ft.com

Articles You May Like

New York City Water back in market with $450 million deal
Options open for public-private partnerships on workforce housing
US stocks notch first 4-day losing streak since start of year
‘Blowout’ US retail sales shake bond and currency markets
High-speed trader Jane Street raked in $4.4bn at start of 2024