Prepare to be surprised! If Brazil experiences another period of drought in the next weeks, your morning cappuccino will certainly become much more expensive.
And it’s already quite costly!
According to a recent analysis from Hackett Financial Advisors, a financial organisation with strong expertise in the commodities markets, “should follow-on rains fail to occur [in Brazil] and cause many aborted blooms, the coffee market might get quite enthusiastic again.”
To put it another way, if there isn’t enough rain in Brazil this spring, traders will likely flood the coffee market, driving up futures prices.
Coffee prices have already risen dramatically in the last ten months. According to data from the TradingEconomics.com website, a pound of arabica beans, the high-quality material used to create your morning brew, recently sold for $1.84, up from $1 in November.
The massive rise was sparked by a 30 percent decline in bean production in Brazil this year, owing to a mix of chilly and dry weather at vital times. According to the United States Department of Agriculture, Brazil is the world’s top producer of arabica beans.
“The losses in coffee plantations could amount to more than a third of what Americans drink in a year,” TradingEconomics reports, to put the scale of the harvest shortage in context.