Perfect time to apply 100 percent tariffs, right?
Arabica coffee prices have hit their highest level since 1977 as concerns grow about tight global supplies.
Continuous arabica coffee futures on the ICE rose 2.8% to $3.175 a pound, near the all-time record of $3.356. Futures are up nearly 69% in the year-to-date.
The surge reflects weather concerns in powerhouse producer Brazil, including an extended drought and high temperatures.
Despite good coffee flowering on recent rains in the country, there are worries that the flowers might not attach to the branches, which could lead to production losses in the next season, ING analysts said in a note.
Higher exports this year on stronger prices have also reduced stockpiles, and a low production season could significantly tighten supplies, ING added. Brazil exports rose 8.1% on-month to 4.9 million bags of coffee in October, a record for the month.
Production in Brazil has underperformed for the last four years on adverse weather and if that trend becomes a norm, high coffee prices are needed to rationalize a further supply response, Citi analysts wrote. That said, production in other countries has been growing, a trend that is likely to intensify over the next few years in response to higher prices.
A severe drought earlier this year in Brazil has fueled worries about the country’s output. That comes on top of concerns about another bean variety produced in Vietnam, after a key coffee belt was hit by dryness during the growing period and heavy rains arrived at the start of harvest.
The countries are the two biggest global coffee growers, with Brazil exporting mostly the premium arabica bean and Vietnam leading the market for the cheaper robusta.
The move is set to add to the pain facing cafes and roasters, ultimately boosting costs to consumers. Along the supply chain, sellers have raised prices and scrapped discounts to protect their margins. Nestle SA, the world’s biggest coffee maker, said in November that it will raise prices and make packs smaller to blunt the impact of more expensive beans.
I do expect that cultured coffee and chocolate* will be a better investment than cultured meat. They’re narrower goals and can address a much larger market.
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*Their critical molecules that is.