Coffee prices rise to their highest level since 1997

Coffee futures rose in New York to the highest level since 1997 due to concerns about the crops of major producers, which threaten to further raise costs for roasters and consumers.

Arabica, the high-end variety preferred for specialty drinks, rose as much as 3% on Monday. Coffee prices have surged this year due to significant supply disruptions from key producers, from Brazil to Vietnam. The price of Robusta, the cheaper variety used in instant beverages, recently reached its highest level since the 1970s.

Concerns have increased about a slowdown in Brazil's supplies after a long drought that damaged coffee plants, which could reduce production for the next season.

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Rabobank analyst Guilherme Morya wrote in a report that the potential for next year's harvest "has certainly been affected by the long dry and hot period that affected Arabica coffee crops until September."

This happens even after October rains caused an "excellent flowering" of the trees, added Morya. There is now a concern that the flowers will not set on the branches, endangering the crops, as the flowers will later turn into the cherries containing the beans.

Adding to the pressure is the possibility that the strong pace of Arabica exports this year will result in low stocks at the end of the current season. The Foreign Agricultural Service of the United States Department of Agriculture forecasts that Brazil's coffee stocks will reach only 1.2 million bags when the current season ends in June, a 26% drop compared to the previous year.

The surge in coffee prices highlights the fact that some agricultural products continue to affect consumer budgets, despite wholesale food costs retreating from the record reached in early 2022. Throughout the supply chain, sellers have increased prices and eliminated discounts to protect their margins.