In the last quarter, due to extreme high temperatures in major coffee growing areas in Asia, international coffee prices rose by about 20%. Rubber and other commodity futures also increased due to weather factors.
According to a report by Nikkei News on July 3, London’s benchmark Robusta coffee futures rose by 18.1% from the end of March to the end of June, hitting a historical high of $4,394 per ton on June 6, while Arabica coffee futures rose by 20.6%.
Despite the FTSE/CoreCommodity CRB Index (an international indicator measuring a broader commodities market) hovering around 290 points at the end of June, roughly unchanged compared to the end of March, coffee prices still saw an increase. Crude oil futures, a major component of this index, fell by about 1% to 2% during this period.
The heatwave in Southeast Asia was the main reason for the surge in coffee prices. Since April, average temperatures in Vietnam, Thailand, and the Philippines have been consistently above normal levels, reaching as high as 48 degrees Celsius.
Vietnam produces about 40% of the world’s Robusta coffee beans, used for instant coffee production, but the country is suffering from severe drought, raising concerns about the autumn harvest.
“Last year, the harvest of Robusta variety was poor, leading to price increases as people worry about a second consecutive year of poor yield, prolonging the imbalance in supply and demand,” said Masanobu Takano, head of coffee and tea business at S. Ishimitsu & Co., a trading company in Kobe.
The high temperatures in Southeast Asia also affected the price of natural rubber. Natural rubber is a major export product of Thailand and Indonesia. On June 10, rubber futures on the Osaka Exchange surged to 360.90 Japanese yen per kilogram (2.23 US dollars), hitting the highest point since mid-March.
Rubber production slowed from March to May as the supply of rubber latex decreased. Subsequently, rubber prices typically decrease as latex supply increases.
“The high temperatures this year have damaged rubber trees, and recovery from the disaster is slower, leading to the rise in rubber prices in June,” said Gu Jong of Yushin Securities.
Although rubber prices fell back to the end-of-quarter levels by the end of June, they had previously risen by about 10%.
High temperatures not only affected Asia. According to data from the US National Oceanic and Atmospheric Administration, May this year was the hottest May ever globally, with average temperatures exceeding the record high set in the same month in 2020.
The demand for air conditioning pushed up natural gas prices. North American benchmark Henry Hub futures surged by 48% since the end of March, Dutch TTF natural gas futures rose by 25%, and Asian LNG benchmark prices increased by 33%.
The high temperatures this quarter are likely to continue affecting commodity futures prices.
This year, the appearance of the La Niña climate pattern may result in hotter summers in Japan and other regions than usual, increasing air conditioning demand and exerting continued upward pressure on LNG and other energy prices.