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Sorry Coffee Addicts: Your Habit Might Become More Expensive Very Soon

Sorry Coffee Addicts: Your Habit Might Become More Expensive Very Soon
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Pay attention coffee drinkers: the price of your morning Joe will soon become more expensive due to poor weather issues in Brazil affecting various commodities needed to produce a steaming hot cup of coffee.

According to Bloomberg, dry weather is currently affecting production of arabica and robusta beans across Brazil's coffee belt region. Meanwhile, the same poor weather conditions is affecting production of orange juice.

Arabica coffee, Starbucks Corporation (NASDAQ: SBUX)'s preferred bean, traded at the highest level it has seen on the futures market since February 2015.

Brazil is the world's largest producer and exporter of arabica and robusta beans, as well as orange juice. In fact, orange juice futures and sugar are trading near four-year highs due to poor weather issues in Brazil.

Meanwhile, the net-long position in sugar rose 6.4 percent to 284,448 futures and options in the week ended September 20, Bloomberg noted. Investors are also becoming incrementally bullish on arabica coffee.

A combined measure for holdings in sugar, coffee and orange juice is now the highest since at least 2006.

"This isn't a short-term phenomenon -- you are seeing some real supply-side constraints," Lara Magnusen, a portfolio manager at Altegris Advisors told Bloomberg.

However, Ben Ross, a portfolio manager and co-head of commodities at Cohen & Steers Capital Management, also told Bloomberg that "at some point, the prices are going to hurt demand" and the upside to the various commodities "is limited."

Posted-In: Arabica brazil Brazil Weather coffee Coffee CommoditiesCommodities Markets Media Best of Benzinga


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