- The Wall Street Journal Asia -
A shortage of arabica beans, desired for their mild taste, has been evident in global markets for years, and futures are now catching up with the high prices that have prevailed at South and Central America\'s shipping ports.
Coffee futures broke through the $2-a-pound level for the first time in 13 years as concerns about weather exacerbated a scramble to secure supplies.
A shortage of arabica beans, desired for their mild taste, has been evident in global markets for years, and futures are now catching up with the high prices that have prevailed at South and Central America's shipping ports.
Arabica coffee for December delivery hit $2.0315 a pound on ICE Futures U.S. during intraday trading on Thursday. That was up 6.4 cents, or 3.3%, on the day, and the highest since September 1997.
Prices have been climbing since June as heavy rains brought on by a string of Caribbean storms changed output forecasts from earlier in the year. The wet weather cut into yields and diminished the quality of the region's existing beans.
"It's a scarcity issue that continues to get worse," said Shawn Hackett, the president of Hackett Financial Advisors. "You can't just snap your fingers and turn production around."
Stockpiles certified as deliverable against the futures contract stood at slightly more than 1.8 million bags, each weighing 60 kilograms, this week. That is a decline of 44% from a year earlier. Firms that purchase raw, green coffee and roast it are dipping into the stores of older beans to help meet demand, analysts say, but they are limited in how many lower-quality beans they can use without spoiling the taste.
Some roasters, such as Starbucks Corp., have already reacted to the surge in coffee futures by raising prices on drinks, and more such increases are expected.
Market participants have priced in an expected harvest of 47.2 million bags from Brazil, the world's largest coffee grower but outside the club of nations that compose the blend reflected in the price of ICE coffee futures. Brazilian beans, overall, are considered to be of a lower quality than Colombian and Central American coffee beans.