xi's moments
Home | Americas

Coffee prices froth up as frost hits crops

China Daily | Updated: 2021-07-26 09:26

A man holds coffee berries at the Biological Institute plantation in Sao Paulo, on May 8, 2021. [Photo/Agencies]

LONDON-Coffee prices surged to multiyear peaks recently, extending stellar gains this year after frost damaged crops in the world's biggest producer Brazil.

The futures price for arabica coffee, one of Brazil's top commodity exports, soared to just over $2 a pound on Friday, the highest level since 2014.

The price has risen by 60 percent since January.

Lower quality robusta coffee, which is grown mainly in Asia, leapt to an October 2017 peak of $1,993 a ton, capping a near 40-percent gain this year.

"Several reasons explain the astronomical gains for coffee prices," said Rabobank analyst Carlos Mera, citing mainly the devastating weather conditions in Brazil.

Mera also blamed soaring transportation costs and political unrest in Colombia, the world's third-largest producer.

Brazil suffered a historic drought earlier this year. That was followed by damaging frosts last week at key plantations in Minas Gerais, a southeastern inland state that produces 70 percent of the nation's arabica beans.

Subzero temperatures have "sparked defoliation of crops and even kill the youngest plants" that are crucial for future harvests, Mera said.

Arabica has also been heavily affected because the crop has a biennial plant cycle, whereby low-yield production one year is followed by bumper output the following year.

The market rallied "on freezing temperatures in Brazil growing areas last night", said Price Futures Group analyst Jack Scoville on Friday. Freezing temperatures were reported in much of Minas Gerais and Parana and in Sao Paulo.

"It is not yet known how extensive the damage was but… a significant part of the crop got hurt," he said.

"It is flowering time for the next crop and the flowers were frozen and will drop off the trees." However, Scoville said the weather is now turning warmer.

At the same time, global coffee demand is picking up this year as global economies reopen following pandemic turmoil.

It has stimulated demand for arabica, which is usually used in coffee shops and restaurants, unlike the lower-grade robusta favored for making instant coffee granules.

Though conditions are ripe for high prices, commodity economist Philippe Chalmin said the cost of coffee has been particularly low in recent years. A pound of arabica cost more than $3 in May 2011, Chalmin said.

Coffee producers have experienced a very long price crisis, said Valeria Rodriguez, head of advocacy and public engagement at the fair trade association Max Havelaar.

"In the last four or five years, most of them have been working at a loss," she said.

"If the crop is smaller, it means that there are coffee producers somewhere in Brazil who will have no coffee to sell, and therefore no income."

Mera said the rising prices are being passed on to consumers, "but slowly".

"Roasters use the futures market to hedge themselves against short price increases, so it usually takes three to nine months to see the effects at retail level," Mera said.

Agencies Via Xinhua

Global Edition
Copyright 1995 - . All rights reserved. The content (including but not limited to text, photo, multimedia information, etc) published in this site belongs to China Daily Information Co (CDIC). Without written authorization from CDIC, such content shall not be republished or used in any form. Note: Browsers with 1024*768 or higher resolution are suggested for this site.
License for publishing multimedia online 0108263

Registration Number: 130349