Cold Weather Threat Raises Coffee Prices

Expect to see the price of your cup of coffee raise dramatically if it freezes in Brazil where a third of the world’s coffee is produced. As cold weather raises coffee prices, North Americans may be surprised at the thought of a South American nation having genuine cold spells. But remember that if you go far enough south you get to the South Pole! The largest coffee growing region in Brazil is really two adjacent areas, Morgiana and Sul Minas. In both regions coffee is grown at elevation. This general region is in the South of Brazil. The equator passes through the north of Brazil. However, the southern tip of the country is as far south of the equator as Florida is north. Frost is an occasional risk to Florida orange growers and that is essentially at sea level. Now add the reduced temperature of higher altitude. Thus there is at, at times, a risk of frost in the largest coffee growing region of Brazil and when this happens, as it threatens to do now, the cold weather threat raises coffee prices. The concern of buyers is that coffee production will fall creating relative scarcity. Current coffee futures on the New York Commodities Exchange, NYMEX, are $1.44 a pound for July delivery and $1.50 for December delivery. The March 2015 delivery price is $1.59 a pound. The futures markets are expecting the price of coffee to go up.

Other Reasons for High Coffee Prices

Although Brazil produces a third of the coffee in the world, the combined nations of Central America plus Mexico and Brazil approach the production volume of Brazil. A major concern in this extended coffee growing region is coffee leaf rust. We discussed this problem as it relates to producing healthy organic coffee and noted that many organic growers may need to spray their plants and lose their certification in order to avoid being wiped out. However, even regular coffee growers run the risk of lower production and extensive crop damage even with the use of standard commercial measures to control the blight. As a cold weather threat raises coffee prices so does the risk of hard to control plant disease.

Demand as Well as Supply Drives Coffee Prices

A recent survey found that coffee consumption in the USA rose from 78 percent of adults last year to 83 percent this year. Although the USA is leading consumer of coffee it is nowhere near the top of the list in coffee consumed per capita. The USA ranks number 12 with 4.2 kilograms of coffee consumed per capita. The leaders are Finland at 12 kilos per capita, Norway at 9.9 kilos, Iceland at 9 kilos, Denmark at 8.7 kilos, and the Netherlands at 8.4 kilos per capita. The Sweden, Switzerland, Belgium, Canada, and a dozen or more other nations all rank ahead of the USA in kilograms of coffee consumed every year per capita. More folks drinking more coffee every year drive up the price of coffee, especially as a cold weather threat raises coffee prices as well.

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