How much will your morning coffee cost you this year or next?
Rising Coffee Prices, Likely a lot more than it did recently.
Coffee roasters have seen a 40% increase in raw green coffee beans in the past two months, a 10-year high and prices jumped 77% percent from last year. Coffee Prices Jump as Inventories Continue to Shrink.
The Money Flow Commodities Report, which focuses on agricultural products, states that “the coffee market is set up for all-time highs to be seen over the next crop cycle.”
In other words, you’ll likely pay more than ever for a cappuccino, latte, or espresso soon.
Inventories At Decades-Low
According to the U.S. Department of Agriculture data analysis, the global demand-supply balance for coffee beans looks shaky.
Global consumption for the 2023-24 season is estimated to be 170 million 132-lb bags. That’s higher than any year for at least 20 years and up from 125 million bags during the 2005-06 growing season.
However, over the same period, what’s left in inventory at the beginning of the growing season has shrunk dramatically as a percentage of consumption.
At the beginning of the 2023-24 season, starting inventory was a mere 16% of consumption. That’s not only the lowest in at least two decades but also down dramatically from 33% in the 2005-06 season. Proportionately, that means inventory levels have more than halved relative to consumption.
Little Room For Disruption In Coffee Growing Areas
This also means there is little room for a disruption in this year’s supply of beans. And that will be tricky, especially given that the two largest growing countries have been subject to unfavorable weather conditions.
The Commodities report explains as follows:
“Record heat in Vietnam's core coffee areas in the Central Highlands and bone-dry weather have singed the flowering process and ruptured the conversion to cherries.”
Cherries are necessary for the production of coffee beans. And the current Vietnamese problem is very similar to the situation in Brazil last year.
Rising Coffee Prices - Could it get even worse? Yes
“While we believe the risk of a frost this June/July is not very likely, all it would take is a threat to further light this candle.”
Worse weather doesn’t have to arrive to scare investors into bidding up futures prices. Indeed, a mere hint of the imminent arrival of unfavorable growing conditions could spark enough fear to ignite a major rally.
Higher coffee prices might have coffee roasters stockpiling as many green coffee beans as possible. However, the latter can be exceptionally volatile, especially given the recent extreme weather in key growing regions like Brazil.
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