Coffee has hit a 13 year high last hit in June 1997 on the continued expectations that weather will curtail supply. Excess moisture has lead to fungus problems in Brazil.
The ICE adds Brazil to coffee futures delivery for Arabica contract. This will not occur until March 2013 and will be at a discount of 9 percent from other premium countries. Brazil coffee has always been viewed as inferior for contract delivery.
Nevertheless, the production of coffee is still expected to be higher than previous years. Brazil represents about 40% of overall production. The production for the following years in thousands of 60 kilogram bags:
2011 139,696
2010 126,916
2009 133,623
2008 121,984
2007 133,623
It is clear as price goes up in response to shortages there will be a lowering of quality in the coffee market. Coffee spikes occur on a regular basis. The run-up s strong and decline on the other side is also dramatic. This time should not be any different.
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