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Millennial caffeine fix hunt propels record coffee demand

Millennials' seemingly unquenchable thirst for coffee is helping to push global demand to a record just as supplies are tightening.

Americans are becoming java junkies at an earlier age, and young adults are increasing their daily consumption at a fast enough pace to make up for declines by older folks. The result: Demand in the U.S., the world's top user, is set for an all-time high, and the trend among younger drinkers is also playing out in other big consumers including Brazil and even tea-loving China.

Consumption is climbing as drought crimps supplies from Brazil, the world's biggest producer and exporter.

Demand "has been running well above expectations, thereby tightening coffee markets significantly," said Harish Sundaresh, a portfolio manager and commodities analyst in Boston for the Loomis Sayles Alpha Strategies team, which oversees $5 billion.

Fund Wagers

Millennials - a cohort of young people now aged about 19 to 34 - account for about 44 percent of U.S. coffee demand, according to Chicago-based researcher Datassential.

In the eight years through 2016, daily consumption among 18- to 24-years-olds rose to 48 percent from 34 percent, while it climbed to 60 percent from 51 percent among those aged 25 to 39, according to the National Coffee Association in New York.

At the same, adults 60 and older saw a drop to 64 percent from 76 percent, and there was also a decline for the 40-to-59 age group.

The coffee craze is also starting earlier in life. Younger millennials, born after 1995, started drinking coffee at about 14.7 years old, while older millennials, born closer to 1982, began at 17.1 years, data from the association show.

Take the case of William Tuesca, a 21-year-old junior at Parsons School of Design in New York. He started drinking coffee when he was 5 and now drinks two or three cups daily, even more during midterm exams, he said.

"In school, drinking coffee is also like a fashion symbol and an opportunity to socialize," Tuesca said.

Consumption is rising as supplies are getting tighter. With supplies of robusta getting harder to find, more coffee roasters are using arabica beans, the smoother variety favored by Starbucks Corp., pushing up prices for that commodity.

The good news for coffee addicts is that Brazilian plants still have a chance to recover, which can help temper the price rally.

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