- Coffee prices hit a 4.5 year high on Friday extending their rise to nearly 70% in the past year.
- Dr. Michaela Helbing-Kuhl, an agriculture analyst at Commerzbank, says Brazil’s persistently dry weather is to blame.
- The drought is expected to continue through August which is “not a good sign for the 2022/23 crop,” according to Dr. Helbing-Kuhl.
- Sign up here for our daily newsletter, 10 Things Before the Opening Bell.
Prices of arabica coffee moved above $1.60 per pound last Friday for the first time since the fall of 2016.
Coffee prices have risen nearly 70% in the past year and currently trade around $1.66 per pound.
According to Dr. Michaela Helbing-Kuhl, an agricultural analyst at Commerzbank, global coffee production has been hurt by persistently dry weather in Brazil.
Brazil’s Paraná Basin, which is home to Minas Gerais, the country’s biggest coffee-producing state, has been hit with a drought that forecasters expect to continue through August, according to a recent commodities report from Commerzbank.
2021 was anticipated to be a strong year for Brazilian coffee producers, but many have experienced weak yields as a result of the drought.
Dr. Helbing-Kuhl said the dry weather is “not a good sign for the 2022/23 crop” either, which begins flowering in September. Protests in Columbia have also hampered the transport of Brazil’s already weak harvest.
Coffee is the latest commodity to hit multi-year highs as the global economy reopens.
From lumber to copper, commodity prices have been on the rise this past year amid record demand and supply chain disruptions brought about by the current bust to boom cycle.
Lumber futures rose as high as $1,670.50 per thousand board feet in early May, although they’ve now fallen back to $1,309. Even with the price drop, however, lumber futures are still up more than 260% in the past year.
Similarly, copper futures are up 88% since this time last year amid surging demand. Bank of America commodity strategist Michael Widmer said copper is “the new oil” in a recent note to clients and claimed it could hit $20,000 per ton due to surging demand.
Oil prices also neared 2-year highs on Monday as investors are expecting OPEC+ to confirm it will continue restricting supply at a key meeting.
Despite rising commodities prices in 2021, there are some signs of a let-up for businesses and consumers. New data from Bloomberg shows hedge funds have cut their bullish bets on commodities in recent weeks.
According to data from the US Commodity Futures Trading Commission and ICE, hedge-fund holdings in 20 of the 23 commodities tracked in the Bloomberg Commodity Index fell by the most since November this week.