Coffee futures kept on their upward path, rising in to over four-decade high levels in response to mounting global supply constraints. The chosen choice for specialty coffee, Arabica beans jumped 3.1% on Wednesday, about a 70% increase in 2024.
A severe drought earlier this year in Brazil, the world’s biggest coffee grower, which greatly affected crop output, is mostly responsible for the movement. Complicating matters further, Vietnam, another significant producer, experienced dry conditions during the growing season then too much rain at harvest time, therefore stressing world coffee supply.
With impacts probably passed on to customers, this price explosion is projected to aggravate cost pressures on cafes and roasters. Already reacting are significant industry participants. The biggest coffee manufacturer in the world, Nestle SA (NSRGY), revealed intentions in November to lower pack sizes and boost retail prices, so helping to offset the growing costs.
Rising production costs and persistent supply problems draw attention to the delicate character of world agricultural commodities, therefore exposing the coffee market to further volatility.
This article first appeared on GuruFocus.
