(Bloomberg) -- A cup of coffee is set to get even pricier as persistent supply disruptions push costs for premium arabica beans to the highest in 13 years.
Futures surged as much as 4.8% to $2.718 a pound in New York, the highest since 2011. Prices are up roughly 40% this year as shortages of the cheaper robusta beans stoke demand for the arabica variety favored by specialty chains.
Coffee’s rally has been gathering pace from ongoing concerns about harsh weather in top producer Brazil. The nation is wrapping up its 2024-25 harvest and production prospects weakened after heat and dryness hurt fields.
“It’s all about the weather,” said Kona Haque, head of research at ED&F Man, pointing to the conditions in Brazil’s main coffee growing regions and a lack of rain forecast for the next fortnight.
Attention is now shifting to next season’s potential, and the South American nation has been gripped by its worst drought in decades, threatening further crop damage.
“The potential of the 2025/26 arabica crop is hanging by a thread,” said Rabobank analyst Carlos Mera. Rainfall in arabica-growing areas has been consistently below normal levels since the start of the dry season in April, he said. “This problem comes at a time when the coffee industry is suffering from port congestion in several countries, global scarcity of containers, disruptions around the Red Sea, and also disappointing crops in Vietnam.”
Robusta prices too have rallied for over a week, jumping as much as 4.2% on Monday.
Across the supply chain, the impact of this year’s rally is already evident. JM Smucker Co., whose brands including Folgers and Café Bustelo dominate the US’s at-home coffee market, increased its prices earlier this summer and last month announced further hikes in early October. Restaurant chain Pret A Manger scrapped its UK coffee subscription that gave customers as many as five drinks per day.
Coffee’s advance is adding to inflation across the beverage aisle. Orange juice prices have also spiked due to production shortfalls and a record run-up in cocoa futures is boosting costs for chocolate drinks and desserts. Still, prices for other major staples — like grains — remain subdued, tempering overall food inflation.
--With assistance from Ilena Peng.
©2024 Bloomberg L.P.
