Beverage Prices Skyrocket Amidst Declining Food

Cacao, Robusta Coffee, and Orange Juice Fuel Beverages Price Index Jump Up to Two Times

In the six months leading up to April 2024, the beverage commodity price index exhibited a notable surge, reaching up to twice the level of food prices. This escalation is particularly striking when contrasted with the decline of 10.9% in food prices during the same period, as reported by World Bank commodity markets data. Notably, the beverages commodity price index saw a substantial increase of 85.4%. Specifically, prices saw significant spikes, with cacao rising by 238%, Robusta coffee by 66%, and orange by 34%, while Arabica coffee and tea experienced more moderate increases of 4% and 2%, respectively.

The primary driver behind the sharp increase in cacao prices is the adverse impact of climate change, particularly evident in West Africa, which contributes approximately 80% of the world’s cocoa output. The International Cocoa Organization forecasts a significant decline of nearly 11% in global cocoa supply for the 2023/2024 season due to climate-induced droughts ravaging crops in the region. Additionally, investor speculation has exacerbated the situation, leading to a notable surge in prices. This speculative fervor is exemplified by the fact that non-commercial investors currently hold over 60% of the total open interest across cocoa futures and options in the New York market, marking a historical high according to J.P. Morgan.

Robusta coffee prices reached their highest point in four decades in April 2024. This surge can be attributed to challenges faced by key Robusta suppliers such as Indonesia and Vietnam, grappling with poor crop yields, thereby leading to potential shortages in the market.

Similarly, orange prices have surged to historical records in recent months, with orange juice futures experiencing an 80% surge, reaching a peak in November. This escalation can be attributed to diminished output in key grower Florida due to disease outbreaks and storms.

Amidst supply chain disruptions and increased demand, the role of speculative activities cannot be overlooked in driving up prices of cacao, Robusta coffee, and orange juice.