Why coffee prices will not be dropping anytime soon

Coffee reserves have plunged to their lowest in more than two decades due to soaring shipping costs

Purna Gaudel from Archers Coffee competes in the UAE national Cezve/Ibrik championship at the World of Coffee, Dubai. All photos: Chris Whiteoak / The National

Jose Mariano from The Nightjar dispenses cold coffee at the event.

Mr Gaudel shows off his coffee-making skills.

Suraj Bhandari, a barista from Nepal, samples some coffee.

Vendors make coffee.

Yphan Lee checks coffee beans after being in a roaster.

Judges note down their findings.

Mr Gaudel adds the finishing touches to his creation.

Visitors arrive at the event dressed to impress.

Yousif Al Hammadi, left, and Yaser Al Hammadi from Rocket Bean are ready to greet visitors at their stand.

Karthikeyan Rajendran, founder of Three Speciality Coffee, savours the aroma.

The era of expensive coffee is not going to end anytime soon, judging from dwindling amounts held in reserves.

Stockpiles of high-end Arabica beans, a favourite of artisan coffee shops and chains such as Starbucks, totalled 1.078 million bags, or about 143 million pounds, according to data released Monday by the ICE Futures US exchange. That is the lowest level for inventories monitored by the New York exchange since February 2000.

Coffee reserves certified by the ICE have been falling since September due to soaring shipping costs and unfavourable weather that clipped production in Brazil, the world’s largest grower and exporter.

Shrinking inventories are a concern because countries tap them when they are not getting enough product from overseas. It is a sign that demand is outstripping supplies, and a condition for rising prices. Coffee prices have already been touching multiyear highs at a time when food inflation is gripping the globe.

“Low stocks at the exchange is one of the bullish factors adding to the coffee rally,” said Fernando Maximiliano, an analyst at StoneX in Sao Paulo, Brazil.

Right now, it is more attractive for Brazilian producers to sell into the domestic market rather than pay high shipping costs to deliver the commodity at the exchange, according to Mr Maximiliano.

Brazil currently accounts for 39 per cent of the inventories monitored by ICE, down from as much as 55 per cent last year.