September 17, 2014

Investors in the coffee market are currently watching the weather and the flowering in Brazil to gain indications of the 2015 crop after an unprecedented period of drought.  Brazil produces 35% of the global supply of coffee and climate change and growers planting closer and closer to the equator means that drought has become a relatively new problem for the industry.  Prices for Arabica reached a two-year high of $2.19 per pound in April after forecasts for a poor 2014 harvest of 48 million 60kg bags – down from 54-55 million bags the year before.  But opinions are divided on the 2015 crop with estimates varying widely between 40 million bags and 53 million bags.  The cumulative 2014 and 2015 supply combined could be anywhere between 92 and 102 million bags, translating into a possible price difference of $3.00 per pound versus $1.50 per pound.   After bumper crops in 2012 and 2013 many in the industry believe that importers are holding sufficient inventories of Brazilian coffee through July of 2015 and according to the International Coffee Organization inventories being held by importers increased 18% from March from 18.5 million bags to 21.8 million bags.  In addition, Colombian coffee output is expected to rebound after that country completed its renovation program after coffee rust disease decimated its coffee industry.

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