Coffee prices surge to highest since 1997 on supply fears

 Coffee futures in New York climbed to the highest since 1997 on worries about crops in top growers, threatening to further raise costs for roasters and consumers.

Arabica, the high-end variety favored for specialty brews, rose as much as 3% on Monday. Coffee prices have soared this year due to major supply disruptions in key producers from Brazil to Vietnam, with the more budget-friendly robusta type that’s used in instant drinks recently hitting the highest since the 1970s.

Concerns have mounted that supplies from Brazil will slow after a long drought that hurt coffee trees, which may reduce next season’s output.

The potential for next years’ harvest “has certainly been impacted by the long dry and hot period that affected arabica coffee crops until September,” Rabobank analyst Guilherme Morya wrote in a report.

That’s true even after rains in October led to an “excellent flowering” of the trees, Morya added. There are now fears that the flowers will not fixate on branches, putting the crop in danger as flowers later develop into the cherries that contain the beans.

Adding to pressure is the possibility that a strong pace of arabica exports this year might result in low stockpiles by the end of the current season. The US Department of Agriculture’s Foreign Agricultural Service sees Brazil coffee inventories reaching only 1.2 million bags when the current season ends in June, a 26% decrease versus the previous year.

Coffee’s rally highlights how some agricultural goods are still squeezing consumer budgets even as broader wholesale food costs have pulled back from a record high set in early 2022. Along the supply chain, sellers have raised prices and scrapped discounts to protect their margins, with warnings of more to come.

Arabica futures were up 2.4% at $3.0935 a pound as of 10:23 a.m. in New York. Prices have advanced 64% this year.