Arabica Coffee Prices Soar as Demand Surges, Potentially Raising Drink Prices
Coffee prices have reached an all-time high in New York, driven by increasing concerns over a global supply shortfall, making it one of the most sought-after commodities of the year.
Futures for the arabica variety, preferred in specialty coffees, have soared 80% this year due to crop challenges in major producing regions, threatening to further strain consumers’ budgets. On Tuesday, prices increased by as much as 3.5%, reaching levels not seen since 1972, surpassing a peak from that decade caused by the disastrous Black Frost that devastated Brazilian coffee trees.
Concerns about future supplies from leading producer Brazil have escalated following a severe drought earlier this year. Additionally, there are worries about production issues in Vietnam—the largest supplier of the robusta bean—where its vital coffee-producing area experienced dryness during the growing period, followed by heavy rains at the start of the harvest.
ADVERTISEMENT
CONTINUE READING BELOW
This price surge poses a risk of further increasing costs for roasters and cafes, which may need to pass these costs on to consumers. Under pressure, sellers have already increased their prices and eliminated discounts to safeguard their margins, warning that additional hikes might be on the horizon.
As of now, arabica futures are trading up 3.3% at $3.411 a pound in New York. Prices have exceeded the previous record set in 1977, during a tumultuous period for the market following the devastating frost in Brazil in 1975 that influenced future production.
The surge in coffee prices stands in stark contrast to broader wholesale food costs, which remain significantly below their all-time high reached in early 2022 due to Russia’s invasion of Ukraine. Nevertheless, so-called soft commodities are among the year’s top-performing raw materials.
Cocoa prices have skyrocketed, hitting a record in April in New York, driven by poor harvests in West Africa that created a significant global shortage, unsettling the market. Additionally, orange juice futures are nearing unprecedented heights following droughts and diseases affecting trees in Brazil, the leading producer. Florida, the primary orange juice-producing state in the US, has also faced production declines, with prices buoyed by hurricane-related damage.
© 2024 Bloomberg
Stay updated with Moneyweb’s comprehensive finance and business news on WhatsApp here.