Arabica coffee delivers quite a kick

Today’s price action has seen arabica coffee spike to levels last seen in January 2013, stretching the aggressive bullish run seen since the beginning of the year.

Coffee lovers will be dismayed to see the spike in the arabica price, as these beans account for between 75-80% of the coffee drunk. The reason for this squeeze in the price is a decrease in productivity, with crops yielding 10% less than they did in January on a year-on-year basis. This drop has compounded the dire figures we have seen over the last four months, with yields now being around 60% less than the preceding year.

Numerous regions of Brazil, one of the largest coffee-growing countries in the world, have suffered from a shortage of rainfall in the last six months. Currently they have received only 20-25% of  normal levels. It is anticipated that this will change in the months ahead, although crop growth is unlikely to catch up to the normal quota. In other regions in South America a number of other issues have also arisen, such as infestations of ’leaf rust‘ that have badly hampered production.

None of these difficulties are likely to damage the industry in the long run, but all are partially responsible for the short-term lack of supply. 

Coffee Arabica chart

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.