Coffee prices rise with demand, drought
"Last Thursday, the International Coffee Organization announced that, as a result of smaller harvests in Brazil, the global coffee production could fall short of demand next season by the largest amount in more than a decade.
In response to the news, the S&P GSCI Coffee index rose 6.87 percent in one day to its highest price in over two months.
While Brazilian growers work through a difficult situation caused by the worst drought in decades, farmers say the weather was severe enough to stunt next year’s crop.
However, the higher price of coffee beans can’t be blamed only on the weather.
According to the U.S. Department of Agriculture, the global demand for coffee is expected to hit a record this year. Adding to that forecast, the International Coffee Organization sees consumption growing twice as fast in countries that are the biggest producers of coffee.
In other words, Brazil, Vietnam and Colombia, which together produce 60 percent of the world’s coffee, are becoming their own top customers as the demand for coffee grows there at a faster pace than here in the U.S.
Brazil’s coffee culture dates to the 18th century. But as incomes have risen, consumers are switching to premium coffee, increasing the demand for better beans.
This phenomenon is seen in other coffee exporting countries, as well. For the third week in a row, coffee holds its top spot on our commodity list, with the S&P GSCI Coffee index higher by 5.19 percent over the past five trading days."
By Laif Meidell.