What is Going on With Coffee Prices?
If you have heard any news from the coffee industry, then you have most likely heard about how there is a drought in Brazil and it is hitting the coffee crop and the farmers hard; the drought is apparently hitting the main coffee growing region of Brazil. Consequently, with a drought affecting the ability of coffee plants to grow, there is less being harvested this year than years past and that means anything coffee will be affected in some way, to some degree. For many coffee businesses, the drought in Brazil and the consequential coffee shortage means raising prices. The stories covering the Brazil heat wave due to their summer months have been rocking the industry as well as future specialists and stock brokers see the investments in coffee take a hit as well.
The sugar market has been affected as well since sugar and coffee prices have risen to the highest points in months this week since the world’s largest producer and exporter of the commodity sees some trouble. In the last week, sugar prices have increased by as much as 20 percent and are classified as part of the “bull market” while coffee futures have increased 4 percent. Analysts have been reducing and reducing their estimates for the coffee production as time goes on due to the hot and dry summer beats down on Brazil. While some analysts say there is a shortage, others say there is not; even those who say there is are saying it is minimal.
What this has shown us is just how important Brazil is to the world’s food markets; the large South American country produces approximately 20 percent of the world’s sugar, approximately 33% of the world’s coffee, and approximately 66 percent of the world’s orange juice.
So why is the heat wave having such an effect on the coffee production in Brazil? Well, like we said, the drought is rather extreme and has been quite an ordeal as it is lasting much longer than droughts of the past. This January and February have been the driest months Brazil has seen in approximately 30 years, which is saying a lot about the state of this issue for Brazil. With the little amount of rain the region is getting, the amount of coffee beans that can be extracted from the plants is reduced.
The forecast for the coffee crop is at 53 million bags with each at 60-kilograms. The Arabica coffee gained 4 percent and is now at $1.76 per pound, the highest price since October 2012.
Source: Marcey Barichello