Arabica Coffee Futures. The Canary in the Coal Mine
Updated
With nearly 60 percent up path performance in 2024, Arabica coffee futures rose above $3.00 a pound, the highest mark since May 2011, as traders assess potential problems with next year’s crop in top producer - Brazil.
Despite recent rains, soil moisture levels remain low, leading to limited fruit development and excessive leaf growth, local traders said.
U.S. and European coffee lovers are getting ready to tighten their belts as natural disasters have hit the world’s two largest coffee-producing countries, causing commodity prices to more than double in the past five years.
Droughts in Brazil, the world’s largest coffee producer, and severe typhoons in Vietnam, the second-largest producer, have severely disrupted the global coffee supply chain, driving up production costs that are increasingly being passed on to consumers.
In addition, there are reports that Brazilian coffee farmers are holding back shipments of coffee to the market in hopes of higher prices, leading to further shortages, tighter supplies of coffee on the spot market, and higher prices.
Coffee is literally the “Canary in the coal mine,” signaling climate change, the ecological crisis, and its impact on agriculture.
The idiom originated within the Industrial Revolution in England (back to late XVIII century), when coal miners, lacking modern gas-monitoring equipment, would take canaries (birds) into the coal mine with them. And when dangerous gases like carbon monoxide (which is odorless) accumulated in excess in the mine, they stopped the birds chirping and killed the canaries before killing the miners, thus providing a warning to leave the tunnels immediately.
As some of the world’s largest coffee-consuming regions, coffee lovers in the United States and Europe will find the price hikes particularly hard to stomach.
According to German consumer data company Statista, Europeans consume about 3.2 million tons of coffee a year, accounting for nearly 33 percent of the world’s total coffee consumption, while Americans drink 400 million cups of coffee daily (which equates to 146 billion cups of coffee consumed in the United States each year, or nearly four cups a day for every American adult).
In fact, coffee is more than just a morning ritual in the United States; it has become a cultural and business driver.
But understanding the depth of America’s love affair with coffee may be as complex as the drink itself, and of course, more complex than the current coffee prices.
Natural disasters have taken a heavy toll.
Brazil, which accounts for about 40% of the world’s coffee production, is battling one of its worst droughts in decades. Dry conditions have severely impacted Arabica-growing regions, reducing yields.
The 2023–24 crop cycle is already seeing a sharp drop in production, with some estimates suggesting output could fall by as much as a fifth (20%).
The impact is being felt most acutely in Minas Gerais, Brazil’s largest coffee-producing state and home to high-quality Arabica, which has seen months of lower-than-normal rainfall.
Brazil’s farmers are battling the country’s worst drought in seven decades and above-average temperatures.
While Brazil dominates the Arabica market, Vietnam is the world’s leading producer of the cheaper Robusta beans used in instant coffee. Earlier this fall, Typhoon Yagi devastated the country’s main coffee-growing regions in the Central Highlands, killing at least 60 people and injuring hundreds more.
Thousands of hectares of coffee plantations were estimated to have been damaged, leading to significant losses in both the current crop and future production potential, as the damaged trees will take years to recover.
A perfect storm of environmental concerns has driven prices to all-time highs, above US$3.00 per pound of coffee beans.
The combined impact of drought in Brazil and the typhoon in Vietnam has sent global coffee prices soaring. The International Coffee Organization (ICO), an intergovernmental body made up of coffee-exporting and -importing countries, reported that prices rose nearly 20% in the third quarter of 2024, reaching their highest level in nearly a decade.
The ongoing effects of climate change make a quick return to stability difficult. The sector remains vulnerable to extreme weather conditions, which could further disrupt future harvests. In addition, growing global demand, particularly in emerging markets such as Asia, could continue to put upward pressure on prices, further slowing recovery efforts.
As the world’s two largest coffee producers struggle to recover from the crisis, the outlook for the global coffee market remains uncertain.
Climate change is reducing the area of land suitable for growing coffee crops, and extreme weather events are becoming more frequent, creating a range of challenges for the sector and coffee drinkers in the US and Europe.
In technical terms, the main 12-month graph of coffee prices indicates another buyers attempt to storm the round, 250-cent mark.
Since the price is near to consolidate by the end of the year above this round number, it can contribute to a further rally and multiple price growth in the foreseeable future.
Despite recent rains, soil moisture levels remain low, leading to limited fruit development and excessive leaf growth, local traders said.
U.S. and European coffee lovers are getting ready to tighten their belts as natural disasters have hit the world’s two largest coffee-producing countries, causing commodity prices to more than double in the past five years.
Droughts in Brazil, the world’s largest coffee producer, and severe typhoons in Vietnam, the second-largest producer, have severely disrupted the global coffee supply chain, driving up production costs that are increasingly being passed on to consumers.
In addition, there are reports that Brazilian coffee farmers are holding back shipments of coffee to the market in hopes of higher prices, leading to further shortages, tighter supplies of coffee on the spot market, and higher prices.
Coffee is literally the “Canary in the coal mine,” signaling climate change, the ecological crisis, and its impact on agriculture.
The idiom originated within the Industrial Revolution in England (back to late XVIII century), when coal miners, lacking modern gas-monitoring equipment, would take canaries (birds) into the coal mine with them. And when dangerous gases like carbon monoxide (which is odorless) accumulated in excess in the mine, they stopped the birds chirping and killed the canaries before killing the miners, thus providing a warning to leave the tunnels immediately.
As some of the world’s largest coffee-consuming regions, coffee lovers in the United States and Europe will find the price hikes particularly hard to stomach.
According to German consumer data company Statista, Europeans consume about 3.2 million tons of coffee a year, accounting for nearly 33 percent of the world’s total coffee consumption, while Americans drink 400 million cups of coffee daily (which equates to 146 billion cups of coffee consumed in the United States each year, or nearly four cups a day for every American adult).
In fact, coffee is more than just a morning ritual in the United States; it has become a cultural and business driver.
But understanding the depth of America’s love affair with coffee may be as complex as the drink itself, and of course, more complex than the current coffee prices.
Natural disasters have taken a heavy toll.
Brazil, which accounts for about 40% of the world’s coffee production, is battling one of its worst droughts in decades. Dry conditions have severely impacted Arabica-growing regions, reducing yields.
The 2023–24 crop cycle is already seeing a sharp drop in production, with some estimates suggesting output could fall by as much as a fifth (20%).
The impact is being felt most acutely in Minas Gerais, Brazil’s largest coffee-producing state and home to high-quality Arabica, which has seen months of lower-than-normal rainfall.
Brazil’s farmers are battling the country’s worst drought in seven decades and above-average temperatures.
While Brazil dominates the Arabica market, Vietnam is the world’s leading producer of the cheaper Robusta beans used in instant coffee. Earlier this fall, Typhoon Yagi devastated the country’s main coffee-growing regions in the Central Highlands, killing at least 60 people and injuring hundreds more.
Thousands of hectares of coffee plantations were estimated to have been damaged, leading to significant losses in both the current crop and future production potential, as the damaged trees will take years to recover.
A perfect storm of environmental concerns has driven prices to all-time highs, above US$3.00 per pound of coffee beans.
The combined impact of drought in Brazil and the typhoon in Vietnam has sent global coffee prices soaring. The International Coffee Organization (ICO), an intergovernmental body made up of coffee-exporting and -importing countries, reported that prices rose nearly 20% in the third quarter of 2024, reaching their highest level in nearly a decade.
The ongoing effects of climate change make a quick return to stability difficult. The sector remains vulnerable to extreme weather conditions, which could further disrupt future harvests. In addition, growing global demand, particularly in emerging markets such as Asia, could continue to put upward pressure on prices, further slowing recovery efforts.
As the world’s two largest coffee producers struggle to recover from the crisis, the outlook for the global coffee market remains uncertain.
Climate change is reducing the area of land suitable for growing coffee crops, and extreme weather events are becoming more frequent, creating a range of challenges for the sector and coffee drinkers in the US and Europe.
In technical terms, the main 12-month graph of coffee prices indicates another buyers attempt to storm the round, 250-cent mark.
Since the price is near to consolidate by the end of the year above this round number, it can contribute to a further rally and multiple price growth in the foreseeable future.
Trade active
November 28, 2024
The price of Arabica coffee reached the highest level since at least 1977 as traders worry about shortages due to a record-breaking drought in Brazil, the world's largest coffee producer.
Arabica beans trading in New York hit 326 cents per pound on Wednesday, November 27.
Vietnam, a major producer of the cheaper Robusta bean often used for instant coffee, also has faced abnormally dry weather this year, adding to the supply worries.
Other factors have boosted prices as well, including disruptions to shipping in the Red Sea, potential U.S.-made tariffs, and European Union regulations on deforestation.
Note
December 10, 2024
👉 Coffee Futures hit all the history high mark.
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