Hedge funds and other financial speculators were to blame for “80 per cent” of the surge in coffee prices that created “unbelievable” volatility and uncertainty in the market, the head of the Lavazza coffee company said.
Giuseppe Lavazza, chair of Lavazza Group, which owns the eponymous brand, hit out at the “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. But the benchmark is still well above the historical average of $1,700.
“Coffee, over the last four years, where coffee prices rose so much, 80 per cent is speculation, especially hedge funds,” Lavazza told a gathering of journalists on the sidelines of the Wimbledon tennis tournament.
Factors such as bad harvests had contributed but the “hedge funds really made a difference”.
“Coffee is a big market, but the futures market is a small one. So with [a small amount of] money, you can create a big, big tsunami,” said Lavazza, the fourth generation of his family to lead the company. “This is not a big risk, but if they win the race, they can gain a lot of money.”
He continued: “The volatility and uncertainty that put into the market, it’s really unbelievable . . . for roasters, for traders and even for producers.”
Coffee consumption had fallen 3.5 per cent over the past two years due to the high prices, he said.