Coffee drinkers have been given an unwelcome pre-Christmas jolt after wholesale prices jumped to a ten-year high this week (Simon Duke writes).
Freight bottlenecks and a drought in Brazil have seen the cost of coffee double since January, adding a morning shot of espresso to the growing list of goods set to become noticeably dearer over the months ahead.
On the Intercontinental Exchange, one of the main venues for trading soft commodity futures, the price of a pound of arabica — the higher quality coffee bean — exceeded £2.50 earlier this week. Although coffee futures have drifted back slightly since then, they remain at levels last seen in 2011.
Stocks of the arabica beans, which accounts for about 60 per cent of global production, have fallen to their lowest level on the ICE exchange in almost a year. The industry has been hit by a bitter brew of production and logistics problems.
Earlier in the year, Brazil experienced one of its worst droughts in a century, leaving trees weakened from heat stress. In July, the world’s largest coffee producer was hit by a severe frost, inflicting further damage on trees.
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The impact will be longer lasting than one year’s poor harvest, according to experts. Growers will have to prune branches severely to encourage new shoots and replace younger trees. But it may take years before production returns to previous levels.
Coffee traders are also struggling to book containers and freight capacity because of worldwide upheaval in the shipping industry.
Last week, Cooxupé, the world’s largest coffee co-op and Brazil’s number one exporter, cut its projection for coffee exports this year to 4.8 million bags from 6.5 million previously.
