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Robusta Coffee Bean Prices Surge Amid Supply Concerns

Robusta Coffee Bean Prices Surge Amid Supply Concerns

Robusta Coffee Bean Prices Skyrocket Due to Supply Concerns

Robusta Futures See Significant Increase

Robusta, the less expensive coffee bean that is easier to grow at lower altitudes than its pricier counterpart arabica, saw a significant jump in its futures in London on Tuesday. This is the largest increase since 2011, due to growing concerns over dwindling supplies from Vietnam, the top grower of this bean.

Price Surge Due to Droughts in Vietnam

Robusta bean prices in London saw a daily increase of 6.72% on Tuesday, marking the largest increase since April 5, 2011, which is over 13 years ago. The primary reason for this surge is the devastating droughts in Vietnam that have severely impacted production. Although recent rains have somewhat improved the situation, supply issues are expected to persist throughout the year.

Strong Demand and Global Supply Woes

The demand for robusta beans remains strong, and a recent report by the International Coffee Organization warning about global supply issues has caused the prices to skyrocket. Since 2020, the price of this bean has increased by a whopping 265%. Andrea Illy, chairman of Italian coffee roaster Illycaffe SpA, mentioned on Bloomberg TV that the demand for robusta beans is very high, even though arabica is not being used in blends.

Impact on the Global Coffee Market

Guilherme Morya, an analyst at Rabobank, recently noted strong exports for both robusta and arabica from Brazil, the world's leading coffee producer. He mentioned that the growing uncertainties about Vietnam's production have attracted fast-money hedge funds into the futures market. A recent report from the US Department of Agriculture also stated that harvests in Indonesia are expected to begin this month or next, marking a significant delay due to El-Nino-related droughts.

Other Commodity Prices on the Rise

Not only robusta, but also arabica, cocoa, and orange juice futures have been witnessing a steady increase. This trend is also reflected in spot commodities tracked by Bloomberg, which are moving higher. However, this increase in commodity prices is not good news for those hoping for the Federal Reserve to implement at least two interest rate cuts by the end of the year.

Closing Thoughts

The soaring prices of robusta coffee beans and other commodities present a complex picture of global supply chains and market dynamics. It's interesting to see how factors like weather conditions in one part of the world can have such a profound impact on global commodity prices. What are your thoughts on this development? Do share this article with your friends and engage in a discussion. Also, don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.

Some articles will contain credit or partial credit to other authors even if we do not repost the article and are only inspired by the original content.

Some articles will contain credit or partial credit to other authors even if we do not repost the article and are only inspired by the original content.

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