Were Hedge Funds To Blame For The Surge In Coffee Prices? – CoffeeTalk

Lavazza coffee company chair Giuseppe Lavazza has blamed hedge funds and other financial speculators for “80%” of the surge in coffee prices, which created “unbelievable” volatility and uncertainty in the market. The company’s chair attributed the price surge to big investment funds that had driven prices to levels that were “totally unsustainable for the industry, totally unsustainable even for the consumer.”

London robusta futures, the global benchmark, soared to a record high of more than $5,700 per tonne in January. Prices have eased since on hopes of improved harvests to about $3,500 per tonne this week. However, the benchmark is still well above the historical average of $1,700.

Lavazza said that factors such as bad harvests had contributed but the “hedge funds really made a difference.” He added that coffee consumption had fallen 3.5% over the past two years due to the high prices.

Hedge funds and other speculators have long been blamed for huge moves in commodity prices, with commodity trading advisers being particularly culpable. Fund managers say they provide liquidity to markets and are only active in areas that already exist. However, Lavazza said liquidity issues and soaring margins calls have tipped some in the industry over the edge.

Coffee prices in Europe and the US could rise again due to new deforestation regulations proposed by the EU and US President Donald Trump’s tariffs plans. Lavazza said Trump’s plans for a tariff on EU goods was “fine” but warned that tariffs between the US and coffee-producing countries such as Brazil and Vietnam would be more challenging and push up prices for American consumers.

The proposed EU law to ban imports of a group of seven commodities, including coffee, from being sold on the bloc’s market if they were grown on deforested land has been criticized by 18 member states, including Italy, and chocolate companies such as Cadbury owner Mondelez.

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