August 1, 2021

the bait of grain in the face of soaring prices

Raw materials. A little black guy at the bar. The French have rediscovered a smile and good habits since the resumption of the terraces and then the dining rooms. “No more postponements of opening at Saint-Glinglin, in June 2021, the bars are full”, this could be the saying of this exit from the crisis linked to the Covid-19 pandemic.

The owners of the establishment are rubbing their hands. Especially since, forced to lower the curtain at the end of October 2020, they sailed for a long time on sight, without any real prospect. After sleeping for seven months, professional coffee makers are under pressure. But is this pleasure of espresso on the terrace a luxury? The question is worth asking, especially if you add sugar to your drink. Indeed, coffee and sugar are blazing together on the world markets.

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In New York, the pound of arabica, the most popular variety, has passed the 160 cent mark (about $ 1.32), a four-and-a-half-year high. It has thus shown an increase of nearly 25% since the start of the year. Even robusta, although more often assimilated to soluble drink and therefore less valued, benefits from a similar increase.

Strong social tensions

Investors have they forced on the dose of caffeine? This assumption alone is not enough. To understand this sudden fever of coffee, we must first take the pulse of the Brazilian weather. However, this country, the world’s leading producer and exporter of coffee, is suffering from an acute drought. Already, the year 2021 was expected to be less fruitful, according to Mother Nature’s biennial rhythm, followed by the arabica plants. The cruel lack of water further reduces the hopes of farmers. The coffee is thirsty. As the harvest begins, initial estimates point to a drop of nearly a third in production.

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Another cause for concern: demonstrations and strong social tensions in Colombia, the world’s third largest producer of coffee. They disrupted the flow of exports, which fell by almost half in May. Enough to fuel the surge in prices.

However, on the consumption side, teleworking and the closure of bars and restaurants have reduced the flow of caffeinated drinks. Even if customers have boosted their purchases of packages and capsules in stores to drink at home. But the exit from confinement suggests a resumption of coffee breaks.

This speculative fire affects all agricultural commodities. Wheat, corn, soybeans, palm oil, sugar, coffee… have become the favorites of investors ready to bet big on rising prices. At the risk of a heavy charge for the consumer. According to the Food and Agriculture Organization of the United Nations (FAO), world food prices jumped 40% year-on-year, reaching their highest level since 2011 in May.

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