Home Market Futures Markets Arabica coffe...

Arabica coffee futures soar to 7-year high sparked by tight supply and climate concerns

Intercontinental Exchange coffee futures prices

MILAN – Arabica coffee futures soared to a 7-year high on Friday sparked by global supply prospects and climate concerns due to a strengthening La Niña phenomen. Prices were pushed higher also by a recent fall in the US currency. The Ice Arabica contract for December delivery rose by 880 points to close at 219.70 cents per lb, the highest level on record for the front month since October 2014.

During the week, the contract rose by more than 10% from last Monday’s lows of 199.65 cents.

Robusta coffee futures for January delivery in London closed the week marginally low at US$2,277, from multi-year highs on Thursday.

The price surge occurs as Brazil faces the consequences of a drought that hit the coffee belt earlier this year and a cold snap that destroyed some crops during the winter.

In its third forecast, Conab cut its Brazil 2021 arabica coffee production estimate by -8% to a 12-year low of 30.7 mln bags from a May estimate of 33.4 mln bags, down -37% from 48.8 mln bags in 2020. The fourth estimate is expected in December.

Recent rains eased drought concerns in the Arabica coffee belt. The all-important flowering period for Brazilian coffee trees began last month, and abundant rain may boost coffee tree flowering increasing coffee yields.

Early estimates for the 2022/23 crop anticipate a rise in Arabica production. However, output is expected to be much lesser than in 2020, the previous on-year in the biennial Arabica cycle.

Conab’s first official estimate for CY 2022/23 will be issued in January.

Cecafé reported Friday that Brazil’s exports of all forms of coffee fell by 23.8% y/y to 3,431,172 bags. Green coffee exports were 25.2% down at 3,117,273 bags of which 2,883,755 (-22%) of Arabica and 233,518 (-50.4%) of Robusta.

Cecafé said coffee exporters are still struggling to find space in container ships while facing successive cancellations of bookings due to soaring prices.

Meanwhile, excessive rainfall has impacted harvests in Colombia, another leading supplier. Ongoing supply chain issues have complicated the shipping process and led to higher costs.

The cost of everyday products and commodities such as coffee and gas has surged in recent months as the global economy recovers from the COVID-19 pandemic. The consumer price index rose 6.2% year-over-year in October, marking the largest increase in more than 30 years.