Arabica Bean Reaches 2011 Highs As Coffee Inflation Skyrockets

Consumer Outrage Over Rising Food Prices

Consumers are expressing their anger as the prices of ground beef, orange juice, eggs, cocoa, and food in general have soared. For households with low to middle incomes, a trip to the grocery store has become a distressing experience in the current economic climate. To add to the burden, the price of a cup of coffee is predicted to rise even higher towards the end of the year and likely into the first half of 2025.

Adverse Weather Conditions Push Coffee Prices Up

According to Bloomberg, premium arabica beans are facing unfavorable weather conditions in Brazil, the top producer, which has led to a surge in prices in New York to a 13-year high. Concerns about severe weather in Brazil, the leading producer, have been driving coffee rallies. As the country concludes its 2024-25 harvest, production prospects have been weakened due to heat and dryness damaging fields. Attention is now turning to the potential for next season, with Brazil suffering from its worst drought in decades, posing a further threat to crops.

Arabica Futures Jump, Robusta Shortages Increase Demand

Arabica futures in New York have leaped to $2.6475 per pound, the highest since 2011. Prices have risen 40% this year as shortages of the cheaper robusta beans have increased demand for arabica from coffee chains.

Price Hikes Impact Across the Supply Chain

Bloomberg highlights the recent price increases. This year's rally has already had a noticeable impact across the supply chain. JM Smucker Co., whose brands like Folgers and Café Bustelo dominate the US's at-home coffee market, raised its prices earlier this summer. Pret A Manger, a restaurant chain, has discontinued its UK coffee subscription, which offered customers up to five drinks per day.

Giuseppe Lavazza, chairman of coffee roaster Luigi Lavazza SpA, told Bloomberg that low-cost robusta beans in Vietnam, the world's leading producer of robusta, have also faced unfavorable weather conditions. This has led to a production shortfall, pushing prices higher. Lavazza described the situation as unprecedented in the history of their industry, and noted the long-lasting impact of these conditions.

European Union Deforestation Regulation

Lavazza also mentioned the European Union Deforestation Regulation, which will be enforced by the end of 2024. This regulation will ensure that companies do not source coffee beans from deforested lands. He noted that this will undoubtedly result in higher costs for the coffee that European roasters purchase. He added that companies in the coffee industry are facing significant challenges.

Bottom Line

The key takeaway for consumers is that food inflation is persistent. They should brace themselves for higher prices. Interestingly, there are those who believe that supermarkets are exploiting customers. What are your thoughts on this issue? Share this article with your friends and let's get a conversation going. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.