Just exactly two weeks ago I published on this site a coffee market update.  In that update (which remains available on this site) I noted that the C market price was 1.44, and likely to move up.  Well, it didn't take long.  For those of you busy with other things, the C market has moved up considerably, and all indications point to higher prices and volatility.  For comparison to two weeks ago, today's C closed at 1.60.  Remember, this is the base C price without differentials, etc. 

Here is some news that may explain it for you.  Published today by the Dow Jones Newswires was an article indicating index funds and hedge funds have amassed and are holding a record 31% of the world's coffee supply.  Go ahead and read that sentence again.  To compare that and get a basis for what it means consider that in 2007, these funds held 15% of the world's supply of coffee, and in 2004, they held 5%.

These funds (paper and money investors with no physical need for green coffee) are LONG on over 4 BILLION pounds of green coffee!  By "long", I mean they are hedging their bets that the market will go UP.  Total global coffee production per year is approximately 15 billion pounds.  And, as if to defy logic, differentials are also moving up despite the C market moves up.

For many coffee roasters, this is the first time a significant move upwards has happened since they started in the business.  Quite a few started off in the "well under a dollar" market and these price increases are difficult to comprehend.  Just like we all used to pay .79 cents a gallon for gas, I believe those days are over.  Coffee is the second largest traded commodity in the WORLD and it is not immune to gyrations and volatility. 

Our advice:   Tread carefully at this time.  Be poised to act quickly.  Don't abandon your plan.  Be focused.  Know your needs.  Most importantly, remember that you need green coffee to roast.  By holding off ordering coffee you run the risk of then receiving a delayed shipment, and if you were more low than usual on inventory, you could be in for a big headache - much bigger than a few cents per pound is worth! 

As always, should you have any questions at this time, please feel free to call us.