Coffee Supply Concerns Drive Up Costs For A Cup Of Joe

Tighter bean supplies are leading to higher costs for coffee, that popular beverage imbibed worldwide for its awakening effect.

The most-active contract for the arabica variety fell nearly 2% to $2.450 a pound in New York after rising Tuesday to the highest since early 2022, Bloomberg reported. Still, prices remain about 30% higher in 2024 as shortages of the cheaper robusta variety bolster demand for higher-end arabica, favored by Starbucks Corp. SBUX and Nestle SA’s NSRGY Nespresso brands.

Robusta coffee production in major growers Vietnam and Indonesia dropped this year, leaving roasters scrambling for beans, Giuseppe Lavazza, chairman of coffee roaster Luigi Lavazza S.p.A. told Bloomberg this week. Robusta futures this week reached the highest in data to 2008, before easing. That means arabica has to stay "quite high," too, Lavazza said.

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Vietnam shipped 1.26 million bags of coffee beans in May, down 46.8% from 2.37 million bags a year earlier, according to the June report from the International Coffee Organization (ICO).

“The dramatic decrease is reported as a consequence of the country's low levels of stocks, which were used in recent months to support a relatively robust volume of exports, but are now near depleted,” the ICO said in its report.

“The domestic industry is waiting for new supply from the 2024/25 harvest, still three months away.”

The downturn was “more than sufficient to overwhelm” the 248.2% increase in Brazil's exports of 1.01 million bags in May 2024 versus 300,000 bags shipped in May 2023, the ICO said.

Brazil's green robustas exports total a record 5.46 million bags year-to-date, blowing away the previous record of 3.43 million bags set between October 2014 and May 2015.

Price Action: Publicly traded coffee giants made slight gains by mid-day on Wednesday. Starbucks rose 0.03% to $72.78, while Keurig Dr Pepper KDP gained 0.14% to $32.

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Photo: Chris from Pixabay