Coffee prices have an incredible surge, up to 25%: Why?
We all agree that Covid-19 had an enormous influence on our lives. Everything changed: our daily routine, working environment, and, of course, the prices on the market.
After the Covid-19 crash, the massive rebound in the commodity sector has pushed up everything from precious metals, energy, timber and agricultural prices.
Although some commodities have recently declined, other commodities have remained unchanged. One of the bullish commodities is coffee.
Coffee futures prices remain strong, and the prices rose by nearly 25%. Traders are watching coffee futures breaking a five-year high.
Coffee prices might continue surging and reaching US$225, which already is an increase of more than 25%.
What is causing the surge in the prices?
Sal Gilbertie, President and Chief Investment Officer of Teucrium Trading, blames the unusually severe frost in Brazil for the coffee prices’ surge.
July is the time when Brazilian coffee trees bloom and are “fragile”. July has always been a frost-dangerous month in the country. However, the most severe concerns on the market this year have been “released”.
Brazil needs a good harvest to buffer the slightly lower coffee supply. The frost incident has ruled out the possibility of restoring the coffee supply for another year.
The economy is waking up from the COVID and needs more of it, but the weather in Brazil is not cooperative.
The coffee move begins with a deficit of containers at the beginning of the year
The shortage is at least partly attributable to market changes caused by the impact of the COVID-19 pandemic. Additionally, it has led to increased transportation costs for many commodities.
There is speculation that the “same year” production level is very likely to reach the lowest level in the past six years. Coffee prices have reached their highest levels since 2014. That year, the prices have risen to a high of around US$2.25 per pound.
If the drought persists later this year, it may endanger Brazil’s 2022 harvest, and Romania assumes that the price of coffee may rise to $3.
Either way, consumers are expected to pay higher retail prices for coffee.
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