Coffee prices are on the rise and is likely to continue into the New Year as unfavourable weather in Vietnam and Brazil have raised concerns over coffee supply.
Even as supply concerns mount, investors are optimistic that the pre-pandemic norm will return once coffee shops and other establishments reopen leading to the increase in demand for coffee.
This combination of factors is putting upward pressure on the market price – check our commodity price page for up-to-date information.
Weather is one of the factors behind the rallying of coffee prices with Brazil and Vietnam, the top two producers of coffee in the world, experiencing conditions likely to have a negative impact on production.
Vietnam has received heavy rainfall during its harvesting season, and the sunshine required for the ripening of the coffee beans has been absent, which has heightened concerns over supply. The country is the largest exporter of Robusta coffee beans which accounts for about 40% of the global production.
Some traders are buying stocks in reserve as they anticipate coffee prices to rise further in 2021.
On the other hand, in Brazil, even though the southern region experienced some rainfall over the Christmas weekend, meteorologists expect the area to continue recording higher than normal temperatures and lower than usual moisture.
Commodity investors are also concerned about the ongoing La Niña as this weather phenomenon leads to the delay of the Brazilian monsoon. The result is suboptimal soil moisture in key crop-growing areas. By this period, the monsoon usually has recovered, but this year the situation is different as there is still low seasonal rainfall.
As we enter the new year, the level of the coffee price will in part at least depend on when La Niña will end.