Arabica coffee futures on Tuesday hit highest level in nearly two years since October 2017 as funds bought into the market amid signs of supply tightness in ICE London.
Reasons like shortage of high-quality coffee in Central America, Colombia and Brazil,forecast of deficit Arabica crop in Brazil due to dry conditions could limit next seasons crop.
A shortage of high-quality coffee in Central America, Colombia and Brazil has sparked a scramble for ICE-certified stocks, which have fallen from 2.5 million bags in March to around 2.1 million.
“We see a lot of demand for certified stocks, it adds to concerns the market had about the development of Brazil’s 2020/21 crop,” said Carlos Mera, senior commodities analyst at Rabobank.
He added, however, that at these price levels, it was mostly speculators driving up prices, meaning gains from here on may not be sustained in the longer term.
Kenya’s farmers are grubbing up their coffee bushes to plant other crops as previously low prices and rising temperatures drive small growers to the brink of collapse.
March robusta coffee rose $56, or 4pc, to $1,457 per tonne, a five-month high.