The US has been shivering under the so called ‘polar vortex’ for what feels like months sending natural gas prices up by over 25% since the start of the year. In contrast Brazil has been sweltering through the hottest January on record in parts of the country and the driest since 1943. This has resulted in a severe drought which threatens the country’s coffee crop and sent coffee futures prices up 23% since the beginning of January to around $1.36 per pound. Coffee prices hit a 34 year high in 2011 around $3 per pound before being pummeled due to bumper harvests in Brazil.
According to Agrimoney the impact on coffee has been to retard the growth of seeds within cherries. According to Mr Brando, director at Brazil-based P&A International Marketing ”Usually from 100 kilogrammes of cherries, you will get about 55 kilos of seed. Now you might find you are looking at 50 kilos, 45 kilos or lower. You might be looking at the same yield of cherries, but that the seeds are not fully formed.” Next season’s crop may also be threatened. ”The branches are not growing, and the leaves are not growing on the branches. This is what I think people in the market are beginning to appreciate” Mr Brando said.
According to the US Department of Agriculture the price hike may still mean that Brazilian farmers are losing money on their crop. Production costs as measured in Guaxupe, in Minas Gerais, Brazil’s top coffee-growing state, rose 12% to $1.87 per pound in 2013-14 mainly due to higher fixed and after-harvest costs – for example insurance, transport and depreciation.
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