Coffee crunch sends Arabica to record and risks costlier drinks

Futures for the arabica variety that’s favoured in specialty brews have surged 80% this year.

Coffee hit a record high in New York, on mounting worries over a global supply crunch that have made it one of this year’s hottest commodities.

Futures for the arabica variety that’s favoured in specialty brews have surged 80% this year amid crop setbacks in key growers, threatening to further pinch consumers’ pockets. They rose as much as 3.5% on Tuesday, touching the highest in data going back to 1972 and eclipsing a peak set that decade when a disastrous so-called Black Frost decimated Brazilian trees.

Fears have now grown about future supplies in top grower Brazil after a severe drought earlier this year. That’s in addition to worries about output in Vietnam — the largest producer of the cheaper robusta bean — after its key coffee belt suffered from dryness during the growing period and heavy rains arrived at the start of harvest.

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The rally risks further raising costs for roasters and cafes, which may have to pass them on to consumers. Facing a squeeze, sellers have already raised prices and scrapped discounts to protect their margins, and have warned there may be more to come.

Arabica futures were up 3.3% at $3.411 a pound in New York. Prices surpassed the previous all-time high set in 1977, when the market was rattled by Brazil’s devastating frost of 1975 that impacted future crops.

Record coffee prices are in contrast to broader wholesale food costs, which are well below an all-time high set in early 2022 in the wake of Russia’s invasion of Ukraine. Still, so-called soft commodities account for some of the year’s best-performing raw materials.

Cocoa has soared — hitting a record in April in New York — after poor harvests in West Africa fuelled a huge global shortage and rattled the market. Orange juice futures are also near the highest ever after droughts and disease hit trees in top producer Brazil. Output in Florida, the main juice-producing state in the US, has also plummeted, with prices supported by hurricane damage as well.

© 2024 Bloomberg

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