Weather Conditions in Brazil and Indonesia Cause Surge in Coffee Prices
Prices of coffee have surged 24 percent in 2014 as Brazil experienced the warmest January ever and the least rainfall in 20 years. Being a major arabica bean producer, Brazil's weather conditions particularly influence the arabica coffee price. The arabica coffee price has jumped 26 percent in seven trading sessions, the highest level since July 2000. Meanwhile, weather forecasts do not seem to indicate the arrival of a sufficient amount of rainfall in the remainder of February and March before the dry season kicks in in April.
In Indonesia, one of the world's largest robusta coffee producers and exporters, the opposite has emerged as the peak in the rainy season caused heavy rains and threatens coffee crops in Java and Sumatra. If there will not be a sufficient amount of rainfall in Brazil, thus leading to poor harvests, then global coffee prices can go up as much as 30 to 40 percent. This will bring higher operational costs for companies such as Starbucks.
Bloomberg reported yesterday (05/02) that "arabica coffee for March 2014 delivery jumped 5 percent to settle at USD $1.431 a pound on ICE Futures US in New York, after reaching USD $1.437, the highest for a most-active contract since 15 May 2013. On 31 January 2014, the commodity settled at USD $1.252, up 23 percent from a closing low in November and entering a bull market."
In 2013, coffee prices declined 23 percent, the third consecutive year of falling prices. The US Department of Agriculture expects that global production will again exceed global demand in 2014.
Read an overview of coffee in Indonesia. This includes an analysis of Indonesia's coffee production and export as well as future prospects of the coffee industry in Indonesia.