Coffee commodity prices head towards all-time high
Keith Flurry, senior commodity analyst at Rabobank, said prices are heading past the peaks of 1997 and are now heading towards the all-time highs of 1977.
The analyst said demand has been particularly robust over the past year meaning that the carry over stocks from the bi-annual bumper harvest in South America are well below average.
As the coffee market prepares for the off season, when farmers let trees recover, there is concern that supplies may be insufficient. The situation is particularly acute for high quality Arabica coffee.
Last year the Brazilian harvest was 54 million 60kg bags and in 2011 the off season harvest is likely to be around 44 million bags. Both are historically high figures but Flurry said supply in the market is still tight because demand is running high.
High demand can attributed to the popularity of high-end coffee and new coffee machines in developed markets and the spread of the drink in emerging countries.
Looking forward, Flurry said high prices are likely to remain in the short term but price pressure is expected to ease because good harvests are anticipated in Colombia and Central America next season.
Nevertheless, the possibility of bad weather from La Niña creates a considerable risk that prices could continue their upward march.
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