Due to transportation bottlenecks squeezing supply, coffee hits a 10-year high

Coffee prices on the futures market have risen to a 10-year high, and companies and traders are eager to lock in supply in response to transportation bottlenecks and rising demand at the end of the year.

Traders are turning to futures, a product that allows them to ensure delivery at a set price because they fear that they may not be able to obtain sufficient inventory on the “physical market” where they can make changes to the products they will receive. Many choices.

Traders said that, in turn, the stocks on the Intercontinental Exchange, one of the main coffee futures trading venues, are losing, which has caused futures prices to rise further.

Sucafina’s Ilya Byzov said that the decline in stocks “sends a very loud signal to the market that there is a continuing shortage of coffee.”

The futures price of higher-quality Arabica coffee beans is currently US$2.50 per pound, which is almost double the level at the beginning of 2021.

At the same time, the Brazilian Coffee Exporters Committee, the world’s largest coffee producer and exporter, stated that traders have been struggling to obtain reservations for containers and ships and often face delays in loading by shipping companies.It said that the coffee exports in October Depraved This is an increase of 24% compared to last year.

Rabobank analyst Carlos Mela said that this year’s soaring container freight rates are still at a high level, and concerns about bottlenecks have fueled “just in case” purchases. “As more coffee stays in transit, you need to have more coffee on hand to meet demand,” he said.

The sharp rise in the price of beans has also caused farmers to hoard, restricting export flows and increasing upward pressure on prices. According to US Department of Agriculture officials in Sao Paulo, there are increasing cases of “default” coffee farmers failing to deliver pre-agreed contracts on the physical market.

The U.S. Department of Agriculture stated: “The default rates of the three largest Arabica coffee producers in Brazil, Colombia and Ethiopia are rising. Farmers cannot deliver coffee at the agreed price, so they can try to resell it at the current higher price. “this Latest report About Brazilian coffee.

The line chart of the Drewry World Container Index ($000 per 40-foot container) shows that container freight rates remain high

Worries about another drought in Brazil have also exacerbated the rise in coffee prices.Coffee farmers there Being hit The temperature dropped due to severe frost in July. Although the frost did not affect this year’s harvest, the damage to trees after the worst drought in a century has raised concerns about the health of plants and the quality of beans in the upcoming season.

s arrival La Nina Weather phenomena often cause southern South America to be dry for the second year in a row, raising concerns about low production while demand remains strong. Traders said the rainfall in southern Brazil was below normal, causing farmers to worry.

At the same time, concerns about the new Omicron coronavirus variant that could lead to a lockdown in Vietnam also pushed up futures prices for Robusta Coffee, a low-quality coffee bean traded in London.

Jack Scoville of the Chicago commodity broker Price Futures Group warned: “Covid has also returned to Vietnam and is now back to the rest of the world. This may be a factor in the interruption of shipments.”

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