WASHINGTON — A drought in South America may impact how much people pay for their morning cup of Joe.
A severe drought in Brazil that produces about a third of the world’s coffee supply has coffee futures markets in a tizzy.
Wholesale coffee prices are on track to hit a record high by the end of April, according to Businessweek.com.
There are numbers of factors suggesting the cost of coffee will not rise dramatically for U.S. consumers, but there’s a chance the drought could cause retail prices to rise.
Coffee futures rose 43 percent between Jan. 29 and Feb. 19, 2014. Some analysts estimate Brazil could lose up to 10 percent of this year’s crop because of the drought.
Businessweek.com reports that large coffee companies such as Starbucks and Green Mountain Coffee Roasters not only have warehouses well stocked with coffee beans, but they also have locked in cheap rates with hedging contracts.
If Brazil gets rain, the coffee crop could rebound. The extent of the drought’s impact on coffee supplies may not be quantifiable for another two to three weeks.
The law of supply and demand also suggests there’s longer term potential for the price of coffee to rise. The Washington Post reports the number of coffee drinkers is growing in countries such as Brazil, India and China.