Poor harvests in two growing regions have pushed prices to a seven-year high.
Arabica futures closed on Friday at their highest level in seven years, ending a third consecutive month of gains and adding roughly 11 per cent since the start of September. The benchmark contract for March delivery settled at 3.42 a pound, up from 3.08 at the end of the summer, as traders priced in a second disappointing crop from the highland estates of the southern plateau and a smaller-than-expected harvest along the eastern slopes of the Marrow range.
Robusta, the cheaper bean used in instant coffee and many supermarket blends, followed the same path, rising 9 per cent over the quarter. Dealers at the Port Selwyn commodities floor said volumes had been unusually heavy on Thursday and Friday, with roasters rushing to lock in supply for the first half of next year before prices climbed further.
What went wrong in the fields
The problems began last spring, when an unseasonably dry flowering period on the southern plateau left many trees with fewer cherries than usual. Growers there now expect output to fall by about a fifth compared with an average year. On the eastern slopes the difficulty was the reverse: heavy rain during the picking season split ripening fruit and made it harder for co-operatives to dry beans before mould set in.
Taken together, the two regions supply close to a third of the arabica traded through the main exchanges. Stockpiles held in certified warehouses have fallen for eleven straight weeks and now stand at their lowest since records in their current form began.
“This is not a speculative bubble in the usual sense. There is simply less good coffee in the world this year than there was last year, and the warehouses are telling you so every Monday morning,” said Priya Venkataraman, head of soft commodities research at the brokerage Harlow and Finch.
Ms Venkataraman added that the market had also been pushed higher by funds that track broad commodity indices, which have been adding exposure to agricultural contracts since the autumn. But she cautioned against reading too much into short-term swings, noting that the price had dipped by nearly 4 per cent in a single session in October before recovering within days.
From the exchange to the counter
For drinkers in Calder, the effect is already visible. Three independent roasters in the old town have raised wholesale prices to cafés since the summer, and at least one chain has added 15p to a standard flat white. Tomasz Rydel, who runs a small roastery beside the canal, said green beans now account for more than half of his costs, compared with about a third two years ago.
“We have absorbed what we can,” he said. “The next increase will have to go on the menu board, and I would rather tell customers why than pretend it is not happening.” He has started offering a cheaper house blend that uses a higher share of beans from smaller, less fashionable origins, which have risen less sharply.
Supermarkets typically buy forward contracts months in advance, which means shelf prices tend to lag the exchange by between six and nine months. Analysts expect packaged ground coffee and instant jars to rise early next year, although retailers have so far declined to say by how much. Some have already trimmed pack sizes rather than move the headline price.
Where prices go next
The outlook depends heavily on the next flowering on the southern plateau, which normally begins in late autumn. Early reports from growers’ associations suggest better rainfall than last year, which could ease pressure by the middle of next year if the crop sets well. Weather services there are forecasting a near-normal wet season, though they have been wrong in each of the past two years.
There is also the question of currencies. Many producing regions price their exports in dollars, and a weaker local currency has encouraged some farmers to sell quickly rather than hold stock in the hope of higher returns. That has kept a steady flow of beans moving through the ports, even as overall supply has tightened.
Several brokers expect the March contract to remain above 3.20 a pound until at least the spring. A minority argue that demand is already softening, pointing to lower import figures from some of the larger consuming markets and to a rise in cafés offering smaller cups. For now, the trend has been firmly in one direction, and traders on the Port Selwyn floor said few were willing to bet against a fourth monthly rise when December closes.
