rain in brazil means cheaper coffee
TRANSCRIPT
Coffee prices fell to their lowest level in a year as drought relief comes to Brazil.
The Wall Street Journal writes about expected weather and how coffee sinks to a one year low.
Coffee prices tumbled to the lowest level in nearly
a year, as investors recalibrated their
expectations for supplies amid signs that weather
conditions in Brazil support a healthy harvest.
Arabica coffee for March delivery fell 8.20 cents,
or 4.9%, to settle at $1.5940 a pound on the ICE
Futures U.S. exchange. This was the lowest close
since Feb. 18, 2014, and the biggest one-day
percentage drop since Nov. 20.
The weather in Brazil has been better than some
investors had expected. Intermittent rainfall is
keeping coffee trees hydrated and on track for a
healthy crop, said James Cordier, president of
Liberty Trading Group in Tampa, Fla. Brazil is the
source of roughly half of the world’s arabica
beans, a type of coffee prized for its mild flavor.
Brazil is now “getting showers every day or every
other day, which is quite normal for this time of
year,” Mr. Cordier said. “The idea that the coffee
crop would be weighed down by dry weather
conditions is just incorrect,” he said. “The drought
is far behind us, and the trees have recovered
quite well.”
In short, rain Brazil means cheaper coffee. Brazil
is the big dog in the coffee world and when
drought damaged crops last year prices went up globally.
End of the Downturn, or Not
According a United States Department of
Agriculture report global coffee production
forecast for the 2014/15 growing season is that
coffee production will be down 2.7 million bags compared to the previous growing season.
This is because increases in production
elsewhere were more than offset by a loss of 5 to 10 million bags in Brazil because of the draught.
A bag of coffee weights 69 kg or 152 pounds. But,
now the news from Brazil is that it is raining every day as it should during this time of the year.
But according a report from Reuters it is not clear
that all crops are safe or that drinking water for
city residents will be plentiful with a good Brazil water supply.
Southeastern Brazil is getting some rainfall a year
after a record drought started, but not enough to
eliminate worries about electricity rationing,
drinking-water shortages or another season of
damaged export crops, meteorologists said.
Record-high temperatures and the most severe
drought in at least 80 years punished
southeastern Brazil last year, a region accounting
for 60 percent of the country's gross domestic
product. Lingering climate challenges could
threaten a tepid economic recovery.
Private weather forecaster Somar warned of
irregular rainfall in the center-west soy belt as well
as the southeast throughout the month as an
atmospheric blockage prevents a cold front from
advancing over the key producing regions in the
world's largest exporter of coffee, sugar, soy and
beef.
That is especially worrisome in the southeastern
state of Minas Gerais, which produces half of
Brazil's coffee. Drought there last year wiped out
as much as a third of the crop in some areas,
causing global Arabica prices to rise 50 percent
over the year even as most other commodity
markets tumbled.
As with all agricultural endeavors the farmer
simply needs to plant and tend his crops and hope that the weather cooperates.
While a drought means reduced production a rain in Brazil means cheaper coffee.
And for us at Buy Organic Coffee that means more healthy organic coffee as well.