Coffee prices are spiking due to global shortages. Find out why your morning brew might be costing more.
In a world where the prices of groceries are surging, there is one thing we can enjoy without worry – a nice cup of coffee. But now, because of lower inventory, coffee futures contracts are on an upward trajectory.
Yes, but this is not the entire story. There is more to it. Let’s discover why the prices of coffee are suddenly causing a stir globally and what lies ahead.
Let’s begin.
What’s Happening?
Coffee prices are going up worldwide, and it is because of a mix of reasons coming together.
As of August 21, 2023, a report from Nasdaq.com shows that there is less coffee inventory available globally. The ICE Robusta inventory has dropped to its lowest since 2016, with just about 3,616 lots.
Basically, ICE Robusta inventory refers to the monitored and traded stock of Robusta coffee futures contracts on the Intercontinental Exchange (ICE).
And it is not just robusta; another type of coffee called Arabica coffee inventories has also hit a low point with about 5,13,665 bags, which is the lowest it has been in the last eight months.
To make matters worse, information from the International Coffee Organisation, as reported by Nasdaq.com, shows that from October 2022 to June 2023, coffee exports were down by 6.2% compared to the previous year. This export drop is another sign that the coffee market is struggling with production.
Why Are Coffee Prices on the Rise?
Big coffee-producing countries, like Brazil and Vietnam, are facing output problems. On top of this, India, another important player, got hit with unexpected rain, which has hurt the quality of coffee beans and has disrupted the supply chain.
These combined factors are driving coffee prices higher, impacting both coffee traders and consumers. As reported by the Economic Times, coffee traders, who typically source top-quality beans from Chikkamagaluru in Karnataka, are now passing on these price increases to their customers. The cost of a blend of Robusta and Peaberry beans, known as mixed coffee grounds, has seen a notable rise, moving from approximately Rs 580 per kilogram to about Rs 640-650 per kilogram.
According to the International Coffee Organisation, the coffee market’s shortage is getting worse. The gap has grown from 7.1 million bags in 2021-22 to 7.3 million bags in 2022-23.
This ongoing lack of enough coffee in the market is a big reason coffee prices are increasing. Even though the world is making more coffee than before, about 171.27 million bags, people are drinking more, too, around 178.53 million bags. This difference between how much we have and how much we want is pushing prices higher, making your morning cup of coffee a bit pricier.
Will Coffee Prices Stay Elevated?
Looking ahead, the US Department of Agriculture offers a mixed view on coffee production. There is good news for Arabica lovers as its production is set to rise by 6.9%, possibly easing the supply crunch. However, Robusta coffee is in a tough spot, with an expected 2.4% drop in production for 2023-24. This decline adds pressure on available coffee beans, adding to the industry challenges.
As coffee lovers prepare for price changes, the future of their morning cup hinges on weather, production shifts, and market trends.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The article is for information purposes only. This is not an investment advice.
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