Coffee futures in New York have surged to their highest levels since 1997, driven by concerns over crop shortages in major producing countries.
Arabica coffee, known for specialty brews, climbed 3% on Monday, while robusta prices have also hit a 1970s high.
These price increases are largely due to supply disruptions in key coffee-growing regions like Brazil and Vietnam, raising costs for both roasters and consumers, according to Bloomberg.
Concerns about Brazil’s coffee supply have grown due to a prolonged drought that damaged coffee trees, potentially reducing next season’s output.
Rabobank analyst, Guilherme Morya noted that the hot, dry conditions have significantly impacted the potential harvest, especially for arabica coffee crops, which were affected through September.
Despite October rains fostering an “excellent flowering” of coffee trees, Morya cautioned that there’s still concern over whether the flowers will successfully fixate on branches. If they don’t, the crop could be at risk, as these flowers are essential for developing into cherries that contain the coffee beans.
The pressure on coffee supplies is compounded by the potential for low stockpiles due to strong arabica exports this year.
The US Department of Agriculture’s Foreign Agricultural Service projects that Brazil’s coffee inventories will drop to just 1.2 million bags by the end of the season in June, a 26% decrease from the previous year.
Coffee’s price rally underscores how some agricultural goods continue to strain consumer budgets, even as overall wholesale food costs have eased from the peak in early 2022.
Sellers along the supply chain have raised prices and eliminated discounts to safeguard their margins, with further price increases expected. As of 10:23 a.m. in New York, arabica futures had risen 2.4% to $3.0935 per pound, marking a 64% increase this year.
