Consumers of an ever-important beverage can blame the weather and natural circumstances for the increased amount of money they have to pay for that drink.
Bloomberg reports Vietnam, the globe's top producer of the robusta variation of coffee beans, is slated to see reduced production come this fall, which would follow record generation. Yields of crops in the Asian nation are projected to drop.
The market for Arabica beans, the majority of which are grown in Brazil, also is slated to contract. Both variations will combine for a shortfall of 11.3 million bags for 2014-15, marking the biggest dearth in more than 10 years. That slowdown comes after this year's totals marks a surplus of 4.7 million bags.
"The weather this year does seem a bit harsher with rains arriving later than usual," farmer Pham Viet Dai in the Dak Lak province of Vietnam told the news source earlier this week. "At this point, the fruits look nice and are of similar size to the previous year."
The projected losses in Vietnam are linked with recovering crops, which will bring down production, commodities research head Kona Haque with ED&F Man in London told Bloomberg. He noted the 2013-14 crop in Vietnam was "perfect."
El Niño manifests in South Pacific
A tempest is developing these days and that is likely to impact the price and supply of coffee. Initially that impact is beneficial for the soft commodity's price.
El Niño is manifesting in the South Pacific and for that reason, robusta coffee beans are likely to benefit – for now.
"Robusta futures are expected to find support in the emerging El Nino, which is likely to bring warmer-than-normal conditions to the key production regions of Vietnam," states a May report authored by Rabobank, according to Bloomberg.
Drought in Arabica bean's top grower
Brazil's Arabica bean crops have been suffering under the duress of drought, The Cleveland Plain Dealer reports. Harvests have been cut by millions of pounds due to the lack of rain.
One regional coffee bean supply company penned a letter to its retail and coffee ship clients stating that prices are climbing by as much as 50 cents per pound for wholesale coffee. Those price spikes are likely to percolate down and impact consumers looking for a caffeine fix.
"As you are aware, we experienced a dramatic increase in the cost of green coffee beans at the beginning of this spring," states the letter authored by vice president Dominic Caruso with Caruso's Coffee Inc., according to The Plain Dealer. "This was caused by an unprecedented drought in Brazil coupled with production problems affecting Central America due to a leaf fungus that affects yield called Roya."
A family business, Caruso's said the market is poised to remain high because of those factors. The development comes after two of the U.S.' top producers of coffee said they are raising retail prices.
J.M. Smucker Co., which oversees Folgers and Dunkin' Donuts, and Kraft Foods Group Inc., which produces Maxwell House products, said earlier this month they are boosting prices.
A fungus among us
The price hike also includes consideration for a fungus that is attacking coffee plants throughout Latin America.
The Staten Island Advance reports the fungus has been of issue for the past four decades, and now happens to be one of the times that its damages are more powerful.
In 2012, the coffee rust fungus wreaked an estimated $1-billion-worth of damage of damage in Central America. Nations from Peru to Mexico are dealing with the scourge that primarily attacks the Arabica variation of the coffee bean.
In order to kill the fungus, farmers need to pull the infected plant out of the ground and burn it.
Production slippage is likely to ensue as a result of the fungus, drawing down totals by as much as 40 percent, The Staten Island Advance reports.
THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.
THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.
TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.
YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.
GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.