Climate Change Is Grinding The Global Coffee Trade To A Halt – CoffeeTalk

Global coffee traders and roasters have been hit hard by a steep surge in prices that suppliers have yet to convince retail stores to accept. At the U.S. National Coffee Association annual convention in Houston, attendees reported a 70% increase since November for Arabica coffee futures on the ICE exchange, the benchmark for coffee deals around the world. This year is the first time the instant coffee maker hasn’t sold all of its expected annual production by March. The coffee price hikes have stemmed from lower production in important coffee growing regions, particularly in top grower Brazil, reducing the availability of beans.

A recent Reuters poll predicted that Arabica coffee prices could fall 30% by the end of the year, as high prices curb demand and early signs point to a bumper Brazilian crop next year. However, until prices drop significantly, much of the coffee industry could be in for a world of pain. A chief executive of a major roaster in the United States said some of his clients are not sure they can continue to be in business. Negotiations were taking a long time, and some retail outlets were starting to be short of coffee on the shelves.

Coffee warehouses close to ports in the U.S., which receive beans coming from Central and South America, currently have half their normal volumes. Some storing companies are returning silos to the owners, canceling leasing contracts early. Michael Von Luehrte, owner of broker MVLcoffee, said the coffee market, particularly on the trading side, could see consolidation. Companies with more capital will be able to increase trading volumes, while others will suffer with reduced financing.

Commodities trader Louis Dreyfus said that the coffee planted area has been expanding in reaction to the higher prices. Expansion has happened in countries such as India, Uganda, Ethiopia, and Brazil. The company believes that if Brazil manages to have one big crop, then that in combination with the new planted areas could lead to a collapse in prices.

Read More @ Reuters