Coffee Prices Show No Signs of Slowing Down

Analysts say that there are no signs of slowing down in the record rise of coffee prices, while some warned that the recovery of one of the world's most traded commodities could take years.

March delivery Arabica coffee futures reached an intraday high of 348.35 cents per pound on Tuesday, marking the highest level in nearly 50 years. The contract has since trimmed some of its gains but has risen 70% since the beginning of the year.

The price of Arabica beans, the world's most popular variety, has not been this high since 1977 when snowfall devastated large areas of Brazilian plantations.

Ole Hansen, head of commodity strategy at Denmark's Saxo Bank, stated in a research note published on Tuesday, "The country experienced its worst drought in 70 years in August and September, followed by heavy rains in October, raising fears that the blooming crop could fail." For some, this poor weather in Brazil means that a softening of coffee prices may take a long time.

Hansen added, "Like cocoa, coffee is grown in a relatively narrow tropical belt that includes major producers such as Brazil, Vietnam, Colombia, and Ethiopia. This concentration makes coffee particularly vulnerable to adverse weather conditions, especially in Brazil and Vietnam, which account for about 56% of global production."