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

The best ways to invest in the farms of the future
Soft commodities

The best ways to invest in the farms of the future

Jonathan Compton assesses the key trends in post-pandemic agriculture and how you could profit from them.
20 Aug 2020
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…
22 May 2020

Most Popular

The Bank of England should create a "Bitpound" digital currency and take the world by storm
Bitcoin

The Bank of England should create a "Bitpound" digital currency and take the world by storm

The Bank of England could win the race to create a respectable digital currency if it moves quickly, says Matthew Lynn.
18 Oct 2020
Don’t miss this bus: take a bet on National Express
Trading

Don’t miss this bus: take a bet on National Express

Bus operator National Express is cheap, robust and ideally placed to ride the recovery. Matthew Partridge explains how traders can play it.
19 Oct 2020
Three stocks that can cope with Covid-19
Share tips

Three stocks that can cope with Covid-19

Professional investor Zehrid Osmani of the Martin Currie Global Portfolio Trust, picks three stocks that he thinks should be able to weather the coron…
12 Oct 2020