Analysts suggested that the rally in coffee prices is unlikely to show signs of subsiding for years, and hitting the world’s second most traded commodity by storm.
Earlier this week, Arabica coffee price hit an intraday high of 348.35 cents per pound, the highest in almost 50 years.
Arabica coffee bean, which is the world’s most popular coffee and makes up between 60-70% of the global coffee market, has been suffering from drought and high temperatures, and a supply bottleneck from a few suppliers. These are catalysts that drove the price up to a five-decade high.
Meanwhile, prices of Robusta coffee also soared to record highs in late November.
Coffee is the world’s second most traded commodity by volume after crude oil, and the unusual rally comes from growing uncertainty over the 2025 crop in Brazil, the world’s largest coffee producer.
Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank, said in a report that Brazil has suffered from the worst drought in 70 years during the third quarter, followed by heavy rain at the beginning of the fourth, resulting in growing fears of a possible crop failure in 2025.
David Oxley, the chief climate and commodities economist at Capital Economics, said in a research that the coffee price will only go down when the supply has improved and stock replenished, and this process could take years.
In recent years, coffee demand in China has gone up due to changes in lifestyle and stress from overworking among youth, while the production failed to keep up with demand, stretching the supply line even further.
Nestle, the world’s leading coffee brand, said that it would continue to increase prices and decrease the amount of coffee in a package to offset the rising price of beans.
