Coffee Prices Are Spiking

Global coffee prices are surging due to supply challenges in Brazil and Vietnam, major producers in the industry. Concerns over a dry season in Vietnam threatening Robusta yields and erratic weather in Brazil affecting Arabica crops have prompted a sharp rise in coffee futures. The surge in prices comes at a time when global inventories are low, and speculative trading is on the rise, further fueling market volatility.

The Vietnam Coffee Cocoa Association (VCCO) report issued Tuesday states that futures prices for Robusta coffee reached an all-time high this week due to an ongoing supply shortage in Vietnam. May’s delivery prices reached highs of $3,849 per ton, with July contracts at $3,769 per ton. Vietnam predicts a 20% drop in output in the current crop year, which will likely affect exports in the remaining months of this crop year. The market is ‘waiting for rain’ in Vietnam’s coffee region, which may result in a tense supply situation.

In Brazil, where Arabica is predominant, prices have also been under pressure. Agriway Partners reported that Arabica coffee futures saw an upswing this month partially due to unusual weather patterns across Brazil’s coffee-growing regions. In Minas Gerais, which accounts for about 30% of Brazil’s Arabica production, there was an excessive rainfall of 75.4 millimeters, over three times the historical average. This excessive moisture is feared to have damaged crops at an important time for bean development, potentially diminishing the quality and size of this year’s harvest.

As the world’s largest coffee importer, the U.S. is vulnerable to global market shifts as the world’s largest coffee importer. In 2023 alone, the U.S. imported around $8.2 billion worth of coffee. An estimated $1.35 billion worth of coffee came from Brazil, while $365.75 million worth of coffee, coffee husks, and substitutes came from Vietnam. Imports from India were negligible.

With the U.S. position as the biggest importer, the spike in Robusta and Arabica coffee futures signals potential increases in retail prices paid by consumers at grocery stores and coffee shops.

Read More @ Newsweek

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