Thai Floods are Affecting Coffee Prices

Heavy rains and flooding in Latin America (NYSE:ILF) and Asia are driving coffee prices higher. By midmorning trade on the IntercontinentalExchange (NYSE:ICE), Arabica coffee for December delivery was up 5.6% at $2.4460 a pound.

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Commercial buyers don’t have many options in the near future. Brazil, the top producer of arabica, doesn’t begin its harvest until May. Futures fell as low as $2.2835 a pound earlier this week when investors took money out of the commodities sector in light of Europe’s debt crisis. Roads damaged by flooding and landslides might perhaps delay exports from Central America. Torrential rain has, knocked mature coffee berries from trees in Central America, and damaged infrastructure across the region. Central Americas is the supplier of 10% of the world’s coffee.

Heavy rain is also pounding Colombia, the world’s largest producer of arabica beans after Brazil, igniting worries that disease and fungus will hurt this season’s crop. Floods in Vietnam, the world’s largest producer of robusta, may also hurt coffee shipping, Robusta is a less popular coffee bean roasters sometimes add to their blends when arabica isn’t available.

“Some companies are tapping coffee stockpiles held by exchanges, often considered a supply source of last resort. Stockpiles of arabica coffee in ICE-certified warehouses shrunk 6.6% over the week ended Thursday. In the week ended Oct. 13, stockpiles had declined only 1.6%,” according to The Wall Street Journal.

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