Coffee prices at 6-year high due to extreme cold weather in Brazil

Coffee C futures contracts, the benchmark in Arabica coffee worldwide, rose to their highest level since December 2014.

Coffee prices at 6-year high due to extreme cold weather in Brazil

After extreme cold weather struck Brazil's main coffee fields, this happened. The temperature in South Minas Gerais, the country's most productive area, fell below zero degrees Celsius. This caused frost and freeze. This could have a severe impact on the yield of coffee plants for next year and this year. It is usually around 20 degrees Celsius at this time of year.

Brazil is the top coffee exporter in the world, accounting for around 16% of all global coffee shipments through 2020 (chart below). The US (18.4%), Germany (16.8%), Italy (10%) and Japan (+7.7%) are its major importers. Robusta makes up 30% of the total production. Arabica accounts to 70%.

Weather forecasts indicate that unusual weather conditions may persist through the month. This could allow prices to target higher levels if the market expects greater damage. Technically, 200 could be a psychological resistance. A breach of which may lead to further gains towards 225 - the high in 2014.

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