Commodities

Arabica Coffee Eases Near Two-Year High as Roasters Flag Prices

(ICE)

(Bloomberg) -- Arabica coffee futures cooled after a rapid rally that brought prices to a two-year high as supply concerns mount, threatening to drive up the cost of consumers’ caffeine fix. 

The most-active contract fell as much as 3% to $2.424 a pound in New York, after rising in the prior session to the highest since early 2022. Tuesday’s gains of as much as 7.7% had put the contract in overbought territory, a sign that prices may have risen too far, too quickly.

Futures for higher-end arabica are up about 30% this year, as shortages of the cheaper robusta variety bolster demand for the premium bean favored by Starbucks Corp. and Nestle SA’s Nespresso brands.

Production in major robusta growers Vietnam and Indonesia dropped this year, leaving roasters jostling for beans, Giuseppe Lavazza, chairman of coffee roaster Luigi Lavazza SpA, said in an interview this week. Robusta futures this week reached the highest in data to 2008, before easing. That means arabica has to stay “quite high” too, he said. 

Concerns over a weaker-than-expected harvest are also emerging in top coffee grower Brazil, adding to the supply strain in the global market. Arabica coffee could face volatility with the start of winter in the South American nation as traders look out for any signs of a frost.

“The market is very nervous,” Lavazza said. “And when it’s so volatile, every single news can provoke a shock.”

Prices have risen as the market “is coming to grips” with a reduction in Brazilian production driven by smaller bean sizes, said Ryan Delany, Coffee Trading Academy LLC’s chief analyst. The Brazilian real, though still weak, has also been strengthening against the US dollar. That is providing some relief to coffee markets, as “currencies were perhaps the primary obstacles to the bull market” last month, Delany added.

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