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The market for higher-end coffee just can't catch a break.
The world already was set for a shortfall of the arabica beans used in espressos and lattes this year because of a drought in Brazil, the biggest producer.
Then shipping snags started wreaking havoc on supplies. Now, torrential rains are threatening crops in Colombia, the second-biggest grower.
It all points to increased costs for retail coffee sellers.
'Given the supply conditions, the market is vulnerable to a rally,” said Hernando de la Roche, senior vice president for StoneX Financial in Miami.
The coffee crunch is coming just as consumption is expected to rebound with COVID-19 restrictions easing and vaccinations encouraging people to leave their homes and increase spending.
The strains in the arabica market show what's driving some of the food inflation that's already on the rise.
For now, roasters are drawing on inventories rather than raising prices. But the situation in South America is leaving the market with no room for error ahead of the upcoming frost season in Brazil, when severe cold temperatures between June and August can menace plantings.
The global coffee deficit could amount to 10.7 million bags, according to Marex Spectron. Futures in New York have risen 22 percent since the end of October.
Premiums for Colombian coffee in the cash market are near the highest in a decade, partly helped by tight supplies in Central America.
Prices could rise quickly with further supply problems because commercial traders including exporters and roasters are holding large short positions and may need to exit those wagers, de la Roche said.