Coffee prices are moving high in 10 years with analysts estimating that the tightness in the market will continue until 2023.
December coffee delivery closed close at $ 2.34 a pound on Monday, hitting $ 2.46 on the New York Mercantile Exchange on Thursday, the highest level since 2011, when the commodity exceeded $ 3 per pound. pound.
The International Coffee Association’s reference price was $ 2.07 per pound on Friday, up 85% from a year earlier.
Ole Hansen, head of commodity strategy at Saxo Bank, told CNBC that over the past 12 months, “a perfect storm of events is conspiring to boost our beloved grain.”
“The question for future price movements is whether these developments are longer-term,” he said. “I think we have to focus on the weather in Brazil this year, where we had very low temperatures, a brief period of frost that hit some of the cultivated areas and a period of drought followed.”
Hansen added that these adverse weather conditions will affect the price of coffee not only this year, but also in 2022 and possibly 2023.
In addition to bad weather, restrictions on the global supply chain have had a significant impact on the coffee market, as producers and companies that refine coffee into the product we consume are usually located in different countries. Market uncertainty also stems from conditions in exporting countries such as Ethiopia, which is on the brink of civil war, and Vietnam, where an increase in coronavirus cases could affect production.
Maximillian Copestake, executive director of Marex European coffee sales, said coffee was in “a price rally driven mainly by transport problems”.
“If you have losses in Brazil or Vietnam – or in both countries – something we had, the market is going ‘crazy’ trying to encourage other countries to produce coffee. This is the basic principle, and then the icing on the cake was disruptions in the transport chain “.
Copestake noted that coffee production takes about two years to respond to a change in prices, estimating that they will remain high and unchanged in the future.
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