Coffee Prices Jump As "Intense New Cold Front" Threatens Top-Producer Brazil

Coffee futures in New York jumped Wednesday as new weather forecasts show the world’s largest producer has increased frost risks in top growing areas. 

The National Oceanic and Atmospheric Administration published new forecasts that show low temperatures in Cerrado, Parana state, and Mogiana could record below 5 degrees Celsius (41 degrees Fahrenheit) by May 16. In the south of Minas Gerais and Guaxupe, temperatures may trend even lower through May 19. All of the regions listed are top-producing areas for arabica beans. 

Global coffee reporter & independent analyst Maja Wallengren said, “intense new cold front starting to move into all main 2022 Arabica coffee regions in Brazil this week with temp potentially as low as -5 C° from southern Parana, all SM + AM to NW Cerrado + NE Matas in Minas Gerais. R $JO buyers really going to stay short?”

Arabica futures in New York jumped more than 6% to $2.16 per pound on the news. Prices are up 133% since the COVID-19 low of around $1 per pound and have faded from decade highs of $2.60 in March. 

The International Coffee Organization (IOC) recently slashed its global 2020/21 supply estimate to a deficit of -3.13 million bags from a 1.2 million bag surplus. 

Signs of tighter global coffee supplies have pushed prices to decade highs. Elevated coffee prices may not be immediately pushed to the consumer because of hedging by large US importers.

Starbucks, which buys coffee “12-18 months” ahead, locked-in prices at the lows of early-2021 and are set to expire. This means a cup of coffee at the largest US retail coffee chain could rise further due to supply issues, among the other forms of inflation, such as labor, freight, etc…