The outlook is cloudy for those reliant on a daily caffeine fix. Coffee prices are near a seven-year high after two years of disappointing harvests in Vietnam. The country is the main producer of the Robusta bean, which is used in instant coffee and produces a stronger brew than the milder Arabica bean.
Robusta prices, recently at $1,750 a tonne, have jumped by around 50% in the past 12 months, and were pushed even higher last month when a shipment of 26,000 tonnes, worth more than $40m, was written off after being affected by mould at warehouses in Trieste.
The price of Arabica has also risen. The bean, which accounts for around 65% of global coffee production, comes largely from Brazil, the world’s largest coffee producer. Brazil has harvested most of its 2006-2007 crop and is expected to produce up to 45 million bags towards this year’s total global demand of 117 million bags, up 1.7% on 2005. But dry weather has affected flowering and next year’s crop could fall to 36 million to 40 million bags.
Some hedge-fund managers expect Robusta prices to exceed $2,000 in the next six months, while demand for Arabica is also set to rise due to the Robusta shortage. For those tempted to spread bet, Robusta is a play on the London commodity markets; Arabica on the US.