Arabica coffee prices are the highest in almost a decade

Arabica coffee prices are the highest in almost a decade
# 20 November 2021 13:23 (UTC +04:00)

Arabica coffee prices soared, approaching the highest in almost a decade on increasing signs of shortages in top producers Brazil and Colombia, APA-Economics reports citing Bloomberg.

Prices for the high-end beans delivered in March climbed 4.6% to $2.3475 a pound in New York, the highest settlement for a most-active contract since January 2012. That’s nearly double from a year ago. The beans that are ubiquitous in cafe chains like Starbucks Corp. and Peet’s Coffee & Tea Inc. are adding to the inflationary pressure across many sectors of the economy.

“The supply-chain stress is at unprecedented levels. We have never faced so many adverse factors at the same time,” said Judy Ganes, the president of J. Ganes Consulting. “This is quickly turning into a crisis.”

Brazilian areas that saw output plunge this year hurt by drought and frosts are expected to have subpar yields also in 2022, and the country doesn’t have enough buffer inventory to make up the difference, Ganes said. Prices could soon reach $2.70 to $2.80 a pound, she said.

Local arabica prices in Brazil and Colombia are at fresh record highs, and there’s more concern about farmers defaulting on contracts in both countries.

About 3.5 million bags of coffee — more than 400 million pounds — are sitting in Brazilian warehouses, according to Anike Ejlers Wolthers, founder of Red Container Coffee, a broker based in Santos, the country’s main export hub. Shipments are taking as long as 100 days when the normal is 30, she said.

Gains on Wednesday were fueled by short covering tied to the soon-to-expire December contract, traders said.

India is also facing yield erosion from too much rain. Meanwhile, Ethiopia’s civil war has spared exports so far, yet any adverse developments for Africa’s largest arabica grower could tighten the pipeline further.

Elevated freight and fertilizer costs are compounding the industry’s supply headwinds, and La Nina weather condition could bring erratic weather to South America in the coming months.

Companies are feeling it.

Israel-based Strauss Group Ltd., one of the biggest roasters in Europe said this week higher raw material materials, notably coffee and milk, are eroding margins. The company has raised prices in Brazil, and also in Ukraine, Romania, Serbia and Poland.

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Agrarian Industry

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