Coffee Crops Could Be Devastated by Frost in Brazil (JO, CAFE)

Bloomberg is reporting that there could be significant disruptions to coffee supplies if frost continues to damage coffee plants in Brazil- one of the largest countries for coffee production in the world. Brazil is the largest coffee producing country in the world and the second largest coffee consuming country

A major topic of interest for the coffee community is rising coffee prices, occurring largely as a result of demand outpacing supply. "It estimated in February that North American commodity costs would increase $700 million to $800 million this year, or about 1.5 percent of 2010 revenue," according to Bloomberg's article.

Two ETFs with significant coffee exposure include the iPath Dow Jones-UBS Coffee Subindex Total Return ETN (NYSE: JO) and iPath Pure Beta Coffee ETN (NYSE: CAFE).

The year-to-date performance of JO has been 22.4%. The year-to-date performance of CAFE, which is a new ETN, has been 0.5%. The article can be found here.

According to the USDA, total coffee production will exceed demand by 8.2 million bags in 2010-2011, compared with a deficit of 3 million bags in the prior season.

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