Robusta Coffee Prices Hit Decade-High as Supply Woes Mount Ahead of Peak-Demand Season

Tightening supply of beans "making it difficult to get hold of immediate-delivery coffee"

Image Credits: Aman Rochman/NurPhoto via Getty Images.

Robusta coffee prices soared to decade highs Tuesday spurred by dwindling stockpiles ahead of peak coffee season. 

January futures in London rose more than 5% to $2,325 per ton, the highest price level since September 2011. Arabica coffee prices also rose 2.4% in New York. 

The tightening supply of robusta coffee beans, generally used for instant coffee, is “making it difficult to get hold of immediate-delivery coffee,” Kona Haque, head of research at commodity trader ED&F Man in London, told Bloomberg

“Winter is coming in Europe, which is peak coffee drinking season – that is the time when the roasters want to be sure their warehouses are suitably supplied with coffee,” Haque said. In South America, “you’re also finding that much of the robusta crop is being consumed internally, which is inevitable when you have a shortage” of arabica beans.

Dwindling supplies of the beans have been due to devastating drought and frosts in Brazil this year. The South American country is the world’s largest coffee producer. As for the world’s second-largest coffee producer, Vietnam, sky-high container costs and congestion at ports hinder stockpiles’ drawdown. 

“Cheaper robusta-coffee beans, used widely in instant-coffee beverages such as Nestle SA’s Nescafe brands, are sold out in Brazil. After drought and frost ruined crops of the higher-end arabica variety favored by cafes like Starbucks Corp., local roasters are racing for robusta replacements and driving prices to new records each day,” Bloomberg recently wrote. 

Last month, Nestle SA’s CFO Francois-Xavier Roger revealed the company is bracing for cost inflation to worsen into 2022. Spiking commodity prices like robusta and arabica, plus soaring transportation, labor, and packaging costs, will be pushed along to consumers in the form of higher coffee prices. 

“If we look at 2021, it was certainly much more about dairy and meat and grains. Next year, it will be more about coffee as well. But once again, the large part cannot be hedged, which has to do with transportation, which has to do with packaging material,” Roger told Barclays Global Consumer Staples Conference. 

Earlier this year, we warned readers that cheap coffee is no more, and a global deficit is coming. Coffee prices may still have higher to climb.

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