Robusta coffee prices hit record high due to supply shortage

Robusta coffee prices surge to record high as supplies tighten.

Reuters
First Published10 Jul 2024, 06:32 AM IST
The price of robusta coffee has risen 63% this year due to supply shortage.
The price of robusta coffee has risen 63% this year due to supply shortage.

(Reuters) - Robusta coffee prices surged to a record high on Tuesday with the global market tightened by a slowdown in shipments from top producer Vietnam.

The price of robusta beans has risen 63% this year, peaking on Tuesday at $4,667 a metric ton on the London-based ICE Futures Europe market.

The market has been rising for about 18 months as global producers such as Vietnam struggle to keep pace with steadily rising demand. Prices climbed by 58% in 2023.

Demand for robusta has been growing as roasters switch out of arabica into the cheaper bean. Robusta is typically used to make instant coffee but it has also been increasingly added to roast coffee blends dominated by arabica.

Vietnam's coffee exports in June were just 70,202 tons, taking the cumulative total for the first half of this year to 893,820 tons, down 11.4% from a year earlier, customs data showed on Tuesday.

"This lower export performance for Vietnam during the month of June continues to reflect the tight internal market conditions within this largest robusta-producing nation," coffee trader I & M Smith said in a daily update.

Also Read | Brazil Coffee Crop Disappoints After Beans Affected by Drought

Coffee production in Vietnam almost tripled during the first two decades of this century, peaking at 31.58 million 60-kg bags in the 2021/22 season, according to U.S. Department of Agriculture data.

The last couple of seasons, however, have produced smaller crops with the most recent harvest estimated by the USDA at 29 million bags. A further decline is widely forecast for the upcoming 2024/25 season.

Vietnamese coffee growers have been hit this year by the worst drought in nearly a decade, denting the outlook for the next harvest which gets under way around November.

Also Read | PM Modi mentions ’Araku Coffee’ in Mann Ki Baat: ‘Known for rich aroma’

GROWING DEMAND

Demand for coffee has continued to grow globally despite rising prices.

The International Coffee Organization this month estimated a rise of 2.2% in global coffee consumption in the 2023/24 season.

Trader I & M Smith said on Tuesday that many independent forecasts saw demand continuing to grow in 2024/25, albeit at a slightly slower pace of 1.25%.

"This growth is primarily driven by relatively new coffee consumer markets and producer countries such as China, India, Indonesia, the Middle East and Vietnam who have registered increased internal coffee consumption," the trader said.

The challenges faced by Vietnamese robusta producers have created an opportunity for Brazil, which grows mostly arabica beans but has been expanding production of robusta, a variety more resistant to dry weather.

"Brazil now is planting a lot and probably in a couple of years will became the most important country as regarding the production of robusta, more important than Vietnam," Giuseppe Lavazza, chairman of coffee company Lavazza told Reuters.

Also Read | India’s ‘filter coffee’ ranks second among top 38 coffees in the world

Brazil produced around 21.5 million bags of robusta coffee last year, a near record, and is harvesting what is expected by most analysts to be a larger crop, despite some early complaints by farmers about yields.

"I know that with these kind of prices they (Brazilian farmers) are running like crazy to produce more and more robusta," Lavazza said.

 

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First Published:10 Jul 2024, 06:32 AM IST
HomeIndustryRobusta coffee prices hit record high due to supply shortage

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