I last posted relating to coffee on January 25 when my favorite magic (Arabica) beans had reached record highs. About three weeks have passed and during that time, coffee prices have continued to climb and as I write, coffee futures are on a record setting upward run, like never seen before.
In an article published today on Zero Hedge titled, 'Citi Warns Arabica Coffee May Have Peaked As Demand Destruction Looms', states that demand may have peaked due to higher prices. Yet, Brasil has already stated it expects a 5 million bag deficit and that number could go higher. The same article posits that coffee futures still have leg room to climb even higher, by as much as 25%.
Coffee futures hit a new record high on Tuesday, peaking at $4.295 per pound. Checking this morning, I am seeing coffee going even higher, so the record winning streak continues, as the graph below shows, courtesy of Trading Economics.
I see a demand destruction coming but not for the coffee beans themselves. What I see is people saying enough is enough and skipping the next visit to the coffee shops. It's the coffee shops that'll feel the pinch as more people decide to just start brewing their own coffee at home. It could amount to $1,000 in savings or more for regular coffee drinkers every year! It just makes sense. Also, as the price of a cup of coffee goes up, so do the sales taxes attached to them.
I buy 1Kg bags of coffee beans at Costco and I still see a few brands below $20 (CDN) but I am seeing premium beans go for $27 and up. Still, that's enough to make two pots of coffee every day for a whole month (and then some). The math says it all and the savings add up fast!
If it isn't gold, it's cocoa. If it isn't cocoa, it's coffee. One thing is clear, commodities are a hot item for the next little while so expect these high prices to continue.
(Flashback to February 26, 2024: Morning JAVA: Coffee for longer life!)
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