Why coffee prices will not be dropping anytime soon
09 February, 2022
The era of expensive coffee is not going to end anytime soon, judging from dwindling amounts held in reserves.
Stockpiles of high-end Arabica beans, a favourite of artisan coffee shops and chains such as Starbucks, totalled 1.078 million bags, or about 143 million pounds, according to data released Monday by the ICE Futures US exchange. That is the lowest level for inventories monitored by the New York exchange since February 2000.
Coffee reserves certified by the ICE have been falling since September due to soaring shipping costs and unfavourable weather that clipped production in Brazil, the world’s largest grower and exporter. Shrinking inventories are a concern because countries tap them when they are not getting enough product from overseas. It is a sign that demand is outstripping supplies, and a condition for rising prices. Coffee prices have already been touching multiyear highs at a time when food inflation is gripping the globe.
“Low stocks at the exchange is one of the bullish factors adding to the coffee rally,” said Fernando Maximiliano, an analyst at StoneX in Sao Paulo, Brazil.
Right now, it is more attractive for Brazilian producers to sell into the domestic market rather than pay high shipping costs to deliver the commodity at the exchange, according to Mr Maximiliano.
Brazil currently accounts for 39 per cent of the inventories monitored by ICE, down from as much as 55 per cent last year.
Source: www.thenationalnews.com