'Coffee Becoming a Luxury Item'... Coffee Bean Prices Soar Due to Abnormal Weather Conditions

Record-High Coffee Bean Prices in Trading History
Breaking 'All-Time High' Records Daily
Cause: Extreme Abnormal Heat
Brazil and Vietnam Coffee Production Down
$10 Million Response Announced
Experts Say "Coffee Prices Will Keep Rising"

Due to abnormal weather, global coffee bean prices are soaring rapidly. The record for the most expensive price since humanity began trading coffee is being broken daily. As concerns over supply disruptions grow, companies have announced plans to invest $10 million in responding to abnormal weather. However, it is expected to be difficult to prevent immediate coffee price increases.

Coffee Bean Prices Hit 'All-Time High' Overnight

On the 6th (local time), Arabica coffee futures traded at $4.0895 per pound on the New York market, setting a new all-time high. Arabica coffee surged more than 4% on the 5th, breaking the $4 mark for the first time since humanity began trading coffee. However, according to Nasdaq reports, prices have risen for 12 consecutive trading days, breaking the record again within a single day.

The price of Robusta beans, mainly used in instant or low-cost coffee, is also soaring. On the same day, Robusta futures on the London Exchange reached $5,684 per ton. Although it set a record high of $5,644 on the 31st of last month, the record was broken within a week. Intraday, it even reached $5,707. This is an 82.2% increase compared to $3,096 a year ago, and 176.6% more expensive compared to $2,040 two years ago.

The main cause of the coffee price increase is supply shortages due to abnormal weather. Brazil, which accounts for 60% of Arabica production, experienced the worst drought in 70 years last year. The main producing region, Sehadumineiru, suffered from heatwaves exceeding 40 degrees Celsius, causing production to drop by about 30%. A sudden frost in August last year is also estimated to have reduced production by 10-20%.

Vietnam, an exporter of Robusta beans, also faced abnormal weather. From March to May last year, the Central Highlands coffee-producing region in Vietnam endured the worst drought in 10 years. After the drought ended, the strongest typhoon in the past decade, 'Yagi,' occurred. Some areas experienced abnormal rainfall of 500 mm in a single day. The Vietnam Commodity Exchange expects coffee production to decrease by approximately 10-16% due to these abnormal weather conditions.

Coffee Prices Rising One After Another... Expected to Continue

As coffee bean prices skyrocket, domestic coffee prices are also rising. Paul Bassett raised prices of major products by 200-400 won on the 23rd of last month. Starbucks Korea and Hollys also increased product prices by 200-300 won starting from the 24th. Low-cost coffee brands have also joined the price hikes. Compose Coffee raised the price of iced Americano by 300 won from 1,500 won on the 3rd of this month. Private brand (PB) coffee products sold at convenience stores such as Emart24 and 7-Eleven have also slightly increased in price.

The international community has taken action to stabilize coffee prices. The non-profit agricultural research and development organization 'World Coffee Research (WCR)' announced at the end of last month that it will invest $10 million in programs to strengthen coffee breeding and seeds. This means pouring funds donated by more than 190 member companies, including Starbucks, into developing next-generation coffee varieties. The goal is to provide 100 varieties that can withstand diverse origins and extreme climates by 2030.

Nevertheless, the upward trend in coffee prices is expected to continue for the time being. The Brazilian Coffee Industry Association (ABIC) forecasts that prices will keep rising until new beans are harvested around April to May this year. Coffee bean prices typically reflect in coffee prices with a lag of 5-6 months. Since the current shortage of beans is driving prices up, coffee prices may increase further.

Fernanda Okada, who is in charge of coffee price analysis at Standard & Poor's (S&P), told the BBC, "Demand for coffee remains high, but the inventory held by producers is at a low level," adding, "The upward trend in coffee prices is expected to continue for some time."