Coffee prices have hit record highs. Arabica beans, used a lot in premium blends, recently broke a price record that had stood since the late 1970s. Contracts for future deliveries reached more than $3.44 per pound. Prices have nearly doubled over the past year, with big jumps since October. Traders are concerned about smaller harvests in Brazil (which is one of the world’s top growers).
Poor harvests
Brazil’s coffee trees have faced harsh conditions. Very hot and dry weather arrived at the worst possible time, affecting both this year’s crop and also the buds that will produce next year’s beans. This has led to smaller beans now and stressed trees that could yield less.
Vietnam, another major coffee bean producer (especially of the less expensive Robusta variety), has similar problems as well. A drought damaged plants earlier in the season, and now heavy rainfall is spelling trouble for the harvest. As a result, even the lower-priced Robusta beans cost more.
These supply troubles are filtering down to consumers. Some businesses may try to cut costs in other ways, such as making packages smaller, switching bean types, or improving how they extract flavors to use fewer beans per cup.
Not just a coffee issue
And it’s not just coffee feeling the heat. Other “soft” commodities (plant-based goods that depend heavily on weather and growing conditions) are also seeing big price jumps. Cocoa, the main ingredient in chocolate, has become more expensive because of poor weather conditions in West Africa. And orange juice prices have soared as diseases have devastated Florida’s groves.
Uncertainty
In the case of coffee, the rise in futures prices is mainly because of uncertainty and speculation by traders betting on future shortages. Some producers, those who expected prices to fall, are now having to buy beans at higher costs, pushing prices up further.