High-end coffee shortage ups prices for cheaper beans

Coffee buyers are coming to terms with a global shortfall of arabica coffee, the highend kind favoured by cafés like Starbucks Corp., and turning to cheaper beans, driving up prices.

Robusta coffee capped the biggest monthly increase in more than seven years as demand soars amid multiple supply headwinds. Such beans are considered lower quality, and are often used in instant coffee products and blends.

Severe drought and frost slashed the production outlook for arabica beans in top supplier Brazil. Roasters in the South American nation are expected to use more of the less-expensive type to meet demand and cover the shortfall.

“The fact is there’s going to be a shortage, and Brazil’s robusta crop will go more toward meeting domestic needs,” said Judy Ganes, president of J. Ganes Consulting.

The November contract rose 0.4 per cent to close at US$2,026 a ton in London, the highest settlement for a most-active contract since September 2017. For the month, the price surged more than 13 per cent, the most since early 2014. That’s boosting the cost outlook for firms that use the beans, such as Nestlé SA’S Nescafé brands.

Robusta crops are also seeing headwinds. Vietnam, the biggest producer of the variety, has imposed Covid-related curbs that are slowing shipments. The South Americans also don’t have enough shipping containers, leading to delays.

The popularity of arabica beans has soared in recent years, unlike robusta. Now, the shortage could change the dynamic. In the 12 months ending July 2021, world exports of arabica climbed 4.7 per cent to 82.63 million bags, while robusta exports saw a decline of 3.6 per cent over the period, according to the International Coffee Organization.

“It all boils down to COVID,” Ganes said.

— Carl Fredricksen, ed asner’s Up Character in