In case you don’t drink coffee, or get a whiff of a conversation in a coffee shop, here is some news: The price of a cup of your morning “Joe” may be on the rise in the next year. The Coffee “C” Market which is the coffee futures market, has hit it’s highest point since 2000, and we are watching coffee market prices surge. In an Article from April 23rd from Bloomberg.com, it states”The worst Brazilian drought in decades ravaged plants earlier this year, and production of Arabica beans will be 18 percent less than projected, Volcafe, a unit of commodity trader ED&F Man Holdings Ltd., said in an e-mailed report yesterday. Coffee futures jumped as much as 8.3 percent, driving volatility to the highest since 2000.”
“People are realizing every day that there’s damage, and that the losses will be hard to quantify,” Hernando de la Roche, a senior vice president at INTL F.C. Stone in Miami, said in a telephone interview. “Traders are jittery because of the uncertainty about the Brazilian harvest and what it would mean to world supplies.” The global harvest, which includes the Robusta variety, will fall short of demand by 11 million bags, Winterthur, Switzerland-based Volcafe estimates. That would mean a world deficit about the size of production in Colombia, the second-largest supplier of the premium Arabica beans.
Even Starbucks will be increasing it’s prices as their future outlook is cited in an article from 24/7 Wall Street “Coffee prices started spiking in late January, from less than $1.20 a pound to near $2.15 a pound today. Milk and sugar prices are also higher, and eventually this confluence will translate into higher prices for your favorite coffee beverage, whether a single shot of espresso or a vente double latte with extra whipped cream. Read more: Starbucks Will Have to Raise Coffee Prices – 24/7 Wall St. http://247wallst.com/commodities-metals/2014/04/27/starbucks-will-have-to-raise-coffee-prices/#ixzz30Cm1Cmlu
The drought in Brazil will see more than an effect as coffee market prices surge since not only is the drought pushing up coffee prices but is likely having an impact as well on sugar prices. Sugar production in the country’s (and the world’s) largest sugar-growing region is forecast to drop by 5.2% as a result of the drought. And although demand for sugar as a sweetener is down, demand for sugar cane to make ethanol is growing helping keep prices high.
Lastly to sum up, from today’s article written by Christopher Freeburn at Investor Place: “Prices for Brazilian coffee beans are surging. That means that coffee drinkers will soon be digging deeper to pay higher coffee prices.
With Brazil’s Drought Coffee Market Prices Surge as Global Demand may fall short by 11 Million bags.
Industry research firm Marex Spectron issued a sobering report last week, indicating that global coffee bean production during the 2014-2015 season will be 7.1 million bags short of the level needed to meet global demand. The worldwide coffee supply will be dented by a lower-than-forecast harvest in Brazil this season, the New York post notes.
To sum it up; Fewer coffee beans will lead to increased coffee prices.
This season Brazil is expected to produce about 49 million bags of coffee beans, down from earlier estimates of 55 million bags. A prolonged drought and recent flooding has battered the Brazilian crop. Last year, Brazil produced 53.3 million bags of coffee beans. Not surprisingly, futures for Brazilian Arabica coffee beans have almost doubled — climbing 94% to hit $2.144 per pound in recent trading.
As we at Reggie’s Roast Coffee have been seeing our own issues with Jamaica’s Supply & Demand and cost issues, now it is apparent that the global supply is in the same boat we all are in: People need coffee and Mother Nature is not letting us have our way.