August witnessed a significant surge in the global prices of Arabica and Robusta coffee beans, making them the world`s most rapidly appreciating commodities. Robusta prices escalated by 1.5 times, while Arabica saw an increase of nearly a third. This recent hike builds upon a record-setting trend earlier this year when coffee futures reached a 47-year high. Initially, unfavorable weather conditions leading to poor harvests were cited as the primary cause for the previous price increases, with Robusta prices more than doubling year-over-year and Arabica rising by 80%.
Market Deficit Drives Current Price Increases
The current rise in prices is largely attributed to a natural deficit in the coffee market, occurring just before the anticipated new harvest season in autumn. Denis Gizzatov, Director of “Aroma Tea Coffee,” explains that this phenomenon is likely linked to the buying up of futures on the market and the depletion of existing old stocks. He notes that while such pre-harvest price increases aren`t new, their impact is more critical now due to an already elevated price base. Gizzatov also expresses hope for a good harvest this year, expecting a potential price reduction starting from November as new green coffee beans enter the market.
Denis GizzatovDirector of “Aroma Tea Coffee”
“It seems this is due to futures buyouts in the market. The last month has indeed seen a surge in exchange prices for both Arabica and Robusta. I believe this is connected to the fact that old stocks have run out, and the new harvest typically arrives in autumn, specifically October-November. Prices simply rose due to a slight deficit before the new harvest. There wasn`t any widespread crop failure or other incident. A few years ago, this wasn`t as sharp or impactful on prices because the price itself was low. Now it`s very critical because a price of $10 or $13 for Arabica in Russia is substantial. This is all a lingering effect of past poor harvests. Everyone is hoping for a good harvest this year, anticipating that new green beans will start arriving in countries, including ours, from the new year, and prices will then be favorable. The expectation is that there will be no further increases, but rather a decrease starting around November.”
Consumer Prices Still Expected to Rise Despite Market Fluctuations
Even if exchange prices see a rebound, the final cost of a cup of coffee for consumers is still expected to increase. Mikhail Guseynov, founder of the “Chainikoff” coffee shop chain in St. Petersburg, points out that the major components of a coffee cup`s cost are not solely determined by the raw bean price. Instead, a significant portion is attributed to other operational expenses.
Mikhail GuseynovFounder of “Chainikoff” coffee shop chain in St. Petersburg”
“Mostly, large players have long-term contracts, for a year, for example, fixing their purchase price. The lion`s share of the cost of a cup is personnel expenses, and second is rental costs. The direct cost of the bean itself, if a cup of coffee sells for 200 rubles, the beans in it will be, let`s say, 10-15 rubles. Even if it goes up by 50%, that`s an additional 5-7 rubles. In the cost of a cappuccino, it often happens that milk costs more than coffee beans. A lot of milk goes into a cappuccino, while only eight to nine grams of coffee are used. But how salaries have increased, how utility payments have risen, how rents have increased — these contribute significantly more to the price increase. Therefore, the price of coffee will unfortunately continue to rise, but this is not as much due to raw material prices as it is due to the rising cost of other factors. I don`t think there will be a jump where coffee went from 200 rubles to 250 because of this.”
Moscow Exchange Reflects Rising Futures
Further reflecting the market`s dynamic, the Moscow Exchange launched futures trading for Arabica coffee earlier this year. These contracts, whose value tracks international supply prices, show a continuous upward trend. For instance, November contracts were trading at $3,744, a noticeable increase from their price of nearly $2,950 on August 1st.
Rupert Blackwood 
Clement Ashworth