Extremely dry conditions in Latin America are driving a surge in coffee prices
Local roasted coffee beans, Arabica, in Minca, Colombia. Photo: EyesWideOpen/Getty Images
Extremely dry conditions in Latin America have led to a slowdown in coffee harvesting in Honduras, causing prices to surge 20% on the Intercontinental Exchange in recent weeks, the Wall Street Journal reports.
Driving the news: Coffee futures in mid-October were at $.93 a pound and have now reached around $1.157, spiking a total of 12% over two trading sessions last week alone, per the Journal.
The backdrop: Honduras is the third-largest producer of arabica coffee in the world and has a "disproportionately high influence on futures prices," according to one commodities brokerage firm cited by the Journal. It's here and in other arabica-growing countries like Peru and Brazil where dry conditions have taken a toll.
- Coffee demand is expected to rise globally in the coming year. But the International Coffee Organization is forecasting a decline in world coffee production by 0.9%, to 167.4 million bags for the 2019–20 marketing year.
- That is being driven by a 2.7% decline in arabica production, which is on pace to fall to 95.68 million bags.