With coffee trading at over USD 4 / lb and cocoa prices hovering around GBP 9,000 / ton, traders are preparing for an increasingly stormy market. Over the past year, supply chain experts have logged a growing number of unseasonally hot weather episodes that have been followed by recent sharp rises in commodity prices. Coffee, in particular, is vulnerable to extreme conditions: the first coffee trees were found fruiting in the mid-height levels of a rain forest canopy and their modern descendants have not adapted well to growing conditions on open ground.
There are product prices that are monitored closely by retailers, which earn high margins, such as orange juice, butter or beef. The theory is that while customers are still buying products in these categories, consumer demand is intact. More problematic is the availability of a raw material like sunflower oil, a major crop in Ukraine and Bulgaria. With Ukrainian crops hit by war as well as drought last year, a wide range of food manufacturing businesses have seen sunflower oil price rises of 50% and more. It does not take many ingredient prices to start moving upwards for life to become very hard for any business that supplies multiple retailers, who systematically refuse to countenance price increases.
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