Arabica Coffee Prices Reach Record Highs
Arabica coffee prices have surged past $4 per pound in New York for the first time, driven by growing concerns over limited global supplies, resulting in a significant price rally that has doubled costs in the last year.
This rise is likely to exacerbate challenges for consumers, as the escalating cost of beans translates into pricier coffee at retail outlets. The increase has already dampened demand in major markets and is beginning to decelerate the previously strong consumption growth in developing countries.
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Concerns are intensifying regarding future yields in Brazil, the leading coffee producer, following an extended drought. Strong early-season exports from the country are intensifying the current supply pressures, and local farmers have sold a larger portion of their crops earlier than usual, raising concerns about remaining stock for export.
“We can expect continued volatility until the next harvest arrives,” stated Pavel Cardoso, president of Brazil’s Coffee Industry Association. Recently, investors have accumulated bullish positions in arabica coffee; however, Cardoso notes that some of this momentum may diminish once the new harvest begins in May, yet supply apprehensions persist.
A worker collects coffee cherries on a farm in Buon Ma Thuot, Vietnam, on Tuesday, November 28, 2023. Farmers are facing the ramifications of increasingly unpredictable weather patterns in Vietnam, the world’s leading producer of robusta coffee. Image: Maika Elan/Bloomberg
Additionally, there are concerns regarding production levels in Vietnam, the top producer of robusta beans, following adverse weather conditions affecting the fields. This situation is expected to drive global coffee stockpiles down to a 25-year low, according to forecasts from the US Department of Agriculture.
Read More: Brazil’s Arabica Crop Seen at Lowest Since 2022: Conab
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The most active arabica futures contract rose as much as 4.6% in New York on Wednesday, eventually settling at $3.9775 per pound, a 3.8% increase from the previous session.
Stock levels in exchange-monitored warehouses have been on the decline. However, a surge in coffee awaiting grading indicates that the record prices are attracting more beans to the exchange, as noted by Rabobank analyst Carlos Mera.
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