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Arabica coffee prices near two-year high, Starbucks (SBUX.US) poised for price rise

AInvestWednesday, Jul 10, 2024 7:40 am ET
1min read

Concerns over supply have pushed the price of Arabica coffee futures close to their two-year high, potentially raising the cost of coffee for consumers.

The most active contract for Arabica coffee on the New York market fell 1.5 per cent to $2.465 per pound, after hitting a two-year high on Tuesday. Arabica coffee prices are still up about 30 per cent for 2024, boosted by demand for premium Arabica coffee as cheaper Robusta beans are in short supply, preferred by Starbucks (SBUX.US) and Nestle (NSRGY.US)’s Nespresso coffee brand. Robusta coffee futures have risen about 60 per cent this year.

Giuseppe Lavazza, chairman of the Italian coffee roaster Luigi Lavazza SpA, said this week that the fall in production in Vietnam and Indonesia, the world’s two biggest Robusta coffee producers, this year had led to a scramble for beans. Robusta futures hit a high of $2,000 a tonne this week, the highest since 2008, before falling back. That, he said, meant that Arabica coffee prices had to be kept at “a very high level”.

The global supply crunch has been exacerbated by the prospect of lower-than-expected production in Brazil, the world’s biggest coffee producer, due to adverse weather. “The market is very tense,” Mr Lavazza said. “When the market is so volatile, every piece of news can trigger a reaction.”

In addition, as the EU’s forest clearing regulation (EUDR) is due to come into force at the end of this year, many market participants are expected to pre-buy coffee to avoid proving their supply chains are not linked to deforestation after 2020.

“There is no doubt that European coffee roasters will pay significantly higher for their coffee, and the industry is facing significant market pressure,” Mr Lavazza predicted.

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