Chart of the week: coffee comes off the boil

Coffee prices have tumbled to a 12-year low, thanks to a bumper crop in Brazil – the world’s largest producer – and a stronger US dollar.

915_COTW

Coffee prices have tumbled to a 12-year low. Benchmark New York futures have now fallen below $1 a pound, thanks to a bumper crop in Brazil, the world's largest producer, coupled with a stronger US dollar. Prices are below the cost of production in many of the main coffee-growing countries, says Emiko Terazono in the Financial Times. In Colombia and El Salvador it is $1.20 and $1.50 a pound respectively.

Producers are now calling on the big coffee companies to help "cover farmers' costs as they struggle to make ends meet". The world's top ten coffee firms account for more than a third of bean consumption. Nestl's share is 9%, private equity group JAB Holdings takes 8%, and Starbucks consumes 3%.

Viewpoint

"Oil broke higher [this week], with the price of Brent decisively breaching US$80/bbl, a level it had repeatedly tested since early May, when the US administration announced it would reimpose sanctions on Iranian exports. The immediate trigger for the break-out was the decision at the weekend by the Opec cartel, plus Russia, not to increase their formal output target in the near term. With supply squeezes and bottlenecks elsewhere in the world, dealers fear a growing supply deficit in 2019. Their fears are justified Even with US shale producers and the rest of Opec pumping at full stretch, vigorous enforcement of US secondary sanctions against buyers of Iranian oil could send oil prices spiralling higher. So could any new supply disruptions in the Middle East or Nigeria. As a result, the risks for the oil price will be skewed firmly to the upside over the next 12-15 months."

Tom Holland, Gavekal Research

Recommended

Lab-grown meat: the new agricultural revolution
Soft commodities

Lab-grown meat: the new agricultural revolution

Vegan alternatives are taking off, but the future of food technology lies in lab-grown meat – cultivating steaks and burgers from animal cells, says A…
16 Apr 2021
Lab-grown meat: how “moo’s law” will drive innovation
Soft commodities

Lab-grown meat: how “moo’s law” will drive innovation

Jim Mellon and Anthony Chow, co-founders of Aim-listed Agronomics, explain why they believe that “cellular agriculture” will benefit from massive long…
16 Apr 2021
How you can profit from the fast-growing cannabis industry
Soft commodities

How you can profit from the fast-growing cannabis industry

Once an investment taboo, the cannabis sector is poised to thrive in 2021. David Stevenson looks at how best to buy in.
16 Mar 2021
Invest in water and provide a buffer against future pandemics
Soft commodities

Invest in water and provide a buffer against future pandemics

Global water shortages have long hampered growth and development, and climate change has exacerbated the problem. Will the coronavirus pandemic be a t…
25 Feb 2021

Most Popular

How will Joe Biden’s capital gains tax rise affect crypto prices?
Bitcoin & crypto

How will Joe Biden’s capital gains tax rise affect crypto prices?

The US president wants to increase capital gains tax – and that’s going to hit a lot of American cryptocurrency speculators. Saloni Sardana looks at h…
14 May 2021
US stocks look expensive – here’s what to own instead
Investment strategy

US stocks look expensive – here’s what to own instead

Right now, US stocks are among the most expensive in the world. So if you want a decent return on your investments, you should look into diversifying …
17 May 2021
Inheritance tax planning: the rules around gifting
Inheritance tax

Inheritance tax planning: the rules around gifting

There are plenty of legal ways to minimise an inheritance tax bill. Perhaps the simplest is to give away assets to reduce the size of your estate. Dav…
11 May 2021