Citi Warns Arabica Coffee Rally May Have Peaked As Demand Destruction Looms
Arabica coffee futures have recorded a parabolic rally this year due to tightening supplies from top grower Brazil. However, demand may diminish at these record-high prices, potentially capping further price gains.
Citi analyst Arkady Gevorkyan told clients that arabica coffee’s three-month price target and 2025 average price target are around $3.30 per pound. He stated that high-end arabica beans – favored by Starbucks and other top brands – “have likely peaked as demand starts to curtail and supplies replenish.”
Early Wednesday morning, arabica coffee futures in New York peaked around $4.27 a pound after hitting a record $4.295 on Tuesday. Gevorkyan also expects 2025-26 Brazilian arabica supply at 62.6 million bags, down 5 million from the current market year.
However, late last week, Andrea Illy, chairman of Italian roaster Illycaffè SpA, joined Bloomberg TV for an interview in which he warned that Arabica coffee futures could surge another 20–25% in the coming months.
Illy explained that soaring prices would likely lead to demand destruction as consumers are forced to reduce coffee consumption. He added that the rally in arabica futures—currently on its longest upward streak on record—is primarily driven by supply concerns in Brazil and fears that adverse weather conditions could impact the country’s next Arabica harvest.
Besides bean stocks at exchange-monitored warehouses, Illy warned it’s unclear how much supply is available in some of these top-producing countries. He described the situation: “We are navigating this market blind.”
Tyler Durden Thu, 02/13/2025 – 06:55
Source: https://freedombunker.com/2025/02/13/citi-warns-arabica-coffee-rally-may-have-peaked-as-demand-destruction-looms/
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