Khaberni - The repercussions of the war with Iran have extended to the coffee cup, as fears of ongoing shipping and energy disruptions have driven coffee prices to rise, concurrent with climate threats to Brazilian crops. Bloomberg reports that the coffee market now faces dual pressures from geopolitics and weather simultaneously.
Arabica coffee futures in New York have climbed at the fastest rate in two weeks, rising during transactions by as much as 3.1%, before settling on gains of 2% to $2.883 per pound, according to data provided by Bloomberg. Meanwhile, Robusta coffee in London rose by 2.9%.
Hormuz Drives Costs
President Donald Trump has extended the ceasefire with Iran indefinitely, while peace talks remain pending, according to Bloomberg. Despite the reduced risk of a direct military confrontation, markets still lack clear indicators of the near reopening of the Strait of Hormuz, one of the most important oil and gas passages in the world, keeping energy prices supported.
Carlos Miera, Head of Agricultural Commodity Markets Research at Rabobank, said that the risk of prolonged conflict impacts a number of agricultural commodities, including coffee, where the effect is exacerbated by the dwindling stocks of Arabica and Robusta beans. He added that rising oil prices lead to increased shipping and logistics costs for agricultural commodities.
Darrel Christ, Senior Vice President for Agricultural and Soft Commodities in Asia at StoneX Group, mentioned that coffee prices are likely to be affected due to the fuel-intensive nature of transporting beans, as they are shipped by trucks from inland areas to ports before being exported.
According to Bloomberg, this means that any rise in fuel directly reflects on the cost of transporting coffee, from the fields to the final consumer.
Brazil Adds Pressure
Alongside the war, the market is facing additional support from weather concerns in Brazil, the world's largest coffee producer. Gnanasekar Thiagarajan, director of Commtrendz Research, mentioned that ongoing drought threatens the Brazilian crop outlook.
He added that the rising value of the Brazilian Real reduces export incentives, tightening the global supply and supporting prices.
And it's not just coffee; prices for cocoa and raw sugar in New York have also risen, according to Bloomberg, indicating a broadening impact of tensions and rising energy costs on food and raw material markets.
While traders monitor the path of de-escalation between America and Iran, the market is also watching the skies over Brazil, where politics and weather together determine the global coffee price.
