A shortage brought about by the emerging El Nino ahead of a Northern Hemisphere summer in Vietnam and Indonesia has pushed Robusta coffee bean prices to a 12-year record high. Vietnam is the world's largest producer of Robusta coffee beans while Indonesia is the world's third-largest producer of this cheaper coffee variety.
While many coffee lovers prefer the high-quality arabica beans sold in cafes, Robusta is normally more budget-friendly because the tree is hardier and requires less care, making it easier to produce in large quantities. The said variety is often used in instant coffee, espressos and ground blends sold at supermarkets, which have experienced a comeback as cash-strapped consumers seek alternatives.
"An emerging El Nino weather pattern will curb output from top supplier Vietnam, bringing hotter, drier conditions later this year. Indonesia had its crops harmed by excessive rainfall, with the U.S. Department of Agriculture [USDA] forecasting an 18 percent decline in output for the new season that started in April," Bloomberg reported.
Over the last year and a half, the cost-of-living squeeze has pushed more consumers to cheaper Robusta beans versus high-quality arabica beans. "There's been so much of a demand shift away from higher-priced coffee that even the market isn't even being satisfied by higher Robusta exports," said Judith Ganes, who runs a commodities firm in New York.
According to Bar Chart, on May 25, Robusta coffee was under pressure after the USDA's Foreign Agriculture Service (FAS) projected Vietnam's 2023/24 coffee production would climb plus five percent to 31.3 million bags. The website added that a negative factor is the drier conditions in the coffee fields of Brazil, which is another key grower. Meteorologia reported earlier in the week that Brazil's Minas Gerais region received no rain in the week that ended May 21. Minas Gerais accounts for about 30 percent of arabica crop in the Latin American nation.
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Ready meals also hit by ongoing inflation in UK
Apart from coffee prices, ready meals are also going up in price in the U.K. during the past months, Yahoo Finance reported. According to the trade association British Retail Consortium (BRC), food prices at British supermarkets increased by 15.7 percent in the year to April, the biggest annual increase in records since 2005. (Related: Still no end in sight: Food inflation soars to highest level in 42 years.)
BRC Chief Executive Helen Dickinson said overall shop price inflation eased slightly in April due to heavy spring discounting in clothing, footwear and furniture. "However, food prices remained elevated given ongoing cost pressures throughout the supply chain," she explained.
"The knock-on effect from increased production and packaging costs meant that ready meals became more expensive and coffee prices were also up due to the high cost of coffee beans, as well as key producer nations exporting less," the BRC chief added.
As per Victoria Scholar, head of investment at the U.K. subscription-based online investment service Interactive Investor, there are incipient signs that price pressures are starting to cool while inflation remains elevated. The hope is that food prices will come down in the months ahead, although it is more likely that price growth will just slow instead in the near term as consumers continue to feel the squeeze from rising weekly food bills, she added.
"The unfortunate nature of the type of inflation the U.K. is facing is that it is affecting essential items such as food, hitting those at the lower end of the income spectrum most acutely, particularly with real wage growth stuck in negative territory," Scholar further pointed out.
Read more stories about the soaring food prices at FoodInflation.news.
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