Cappuccino crunch looms as coffee hits decade high

With inflation already on the rise, the cost of a cappuccino or espresso is set to increase after coffee prices hit a 10-year high.

Coffee prices on futures markets have rallied to a decade peak as companies and traders have sought to secure supplies, the Financial Times reported.

Faced with shipping bottlenecks, a recent rise in demand and worries about a drought in Brazil, buyers are trying to lock in supplies at a set price in futures markets, which leave less scope to select produce. Inventories have been drained from Intercontinental Exchange, one of the main venues for coffee trading.

As a result, futures prices for higher quality arabica beans have reached $2.50 a pound, almost double the cost at the start of 2021. Traders are struggling to book containers onto ships, freight prices have soared and farmers are hoarding beans, the FT said.

"There is intense competition among exporters to secure containers and book loadings, all at costly prices," the US Department of Agriculture said in a report. "The three largest Arabica producers, Brazil, Colombia, and Ethiopia, are experiencing increased rates of default, where farmers fail to deliver coffee at agreed-upon prices so they can attempt to re-sell at current higher prices."

The Bank of England has warned that inflation is likely to "comfortably" exceed 5% in 2022, driven mainly by rising energy costs. The BoE has said over two years pressure on goods caused by disrupted supplies is likely to moderate - but in the short term UK coffee drinkers may have to pay more for their caffeine fix.