Dollar rate, Red Sea tensions behind coffee prices surge in Egypt: Coffee Division head

Baheya Wael , Tuesday 6 Feb 2024

Dollar exchange rate and Red Sea tensions are among key reasons behind the significant surge in coffee prices that Egypt has been recently witnessing, Hassan Fawzy, head of the Coffee Division at Cairo Chamber of Commerce, said on Tuesday.

Roasted coffee beans. REUTERS


In a phone interview on the MBC Masr satellite channel, Fawzy indicated that Egypt, where coffee prices have reached EGP 900 per kilo, depends 100 percent on coffee imports.

Prices of coffee, tea, and cocoa have surged by 57.9 percent in December 2023, compared to December 2022, according to data from the Central Agency for Public Monetization and Statistics.

Fawzy attributed the price hikes to three key reasons, claiming that prices would decrease 40 percent if these factors were dealt with.

He highlighted the impact of the dollar exchange rate in the parallel market. “Traders resort to the parallel market due to the inability to obtain currency from banks,” which significantly affects import costs.

Egypt is currently suffering a harsh shortage of hard currency in the market, mainly the US dollar, which caused a significant spike in US dollar rates in the parallel (black) market.

The US dollar had recently reached a peak of EGP 72 in the parallel market, until Sunday when it dropped to EGP 55, while the official US dollar rate is EGP 31.

Fawzy also pointed out the doubled shipping costs due to heightened tensions in the Red Sea region.

Tensions are increasing in the Red Sea as Yemen’s Houthis keep attacking Israel-linked shipping near the strategic Bab El-Mandeb Strait in the crucial maritime route. The Houthis had previously cited Israel's brutal war on Gaza as the pretext for their attacks.

In retaliation, the US and UK struck Houthi targets in Yemen.

Moreover, Fawzy emphasized the correlation with global stock exchange prices, noting a considerable increase in international coffee market prices recently. This surge in global prices, he said, has direct implications for local consumers and traders alike.

“The market dynamics ultimately revolve around supply and demand,” he added, noting a 15 percent decrease in the production output in coffee-exporting countries.

Experts attribute the production rate decline to global warming as it poses an apparent threat to the world’s coffee supply.

With the rising temperatures and shifting rainfall patterns in key coffee-producing areas such as South America, Central Africa, and Southeast Asia, the future of coffee production faces unprecedented challenges.

Around 35-75 percent of the coffee-growing lands in Brazil, the world’s largest coffee producer, could be unusable by the end of the century, according to a paper published by Cássia Gabriel Dias, an agriculture scientist, in Science of the Total Environment.

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