Sign in Subscribe
Financial markets

Coffee Prices Surge Amid Drought Worries and Brazilian Export Tax Fears

Strategic Insights

— 1 min read

Coffee prices jumped by more than 8 percent yesterday, triggering a broad rebound in commodities, as concerns over drought and a potential Brazilian export tax mounted. The Commodity Research Bureau's index of 21 commodities rose by 1.62 points to 229.88, driven by gains in sugar, lumber, crude oil, and precious metals. Brazil's coffee production estimates have already been reduced by more than 40 percent due to damage from frost and drought, contributing to the market's volatility.

Key Takeaways:

  • Coffee prices increased by 8 percent due to drought worries and fears of a Brazilian export tax.
  • The Commodity Research Bureau's index of 21 commodities rose by 1.62 points to 229.88, driven by gains in sugar, lumber, crude oil, and precious metals.
  • Coffee production estimates in Brazil have been reduced by more than 40 percent due to damage from frost and drought.
  • Trading in coffee has been extremely volatile in recent months as traders reassess the effects of weather on Brazil's coffee production.
  • The Coffee, Sugar and Cocoa Exchange in New York has increased the required deposit for coffee futures trading to $5,500 from $5,000 to combat market volatility.
  • Traders are concerned about the possibility of a Brazilian tax on coffee exports to conserve supplies, following the imposition of a 10 percent tax on sugar exports last week.

Statistics:

  • Coffee prices rose by 15.5 cents to $2.0385 a pound for December delivery.
  • The Commodity Research Bureau's index of 21 commodities rose by 1.62 points to 229.88.
  • Coffee production estimates in Brazil have been reduced by more than 40 percent due to damage from frost and drought.
  • The Coffee, Sugar and Cocoa Exchange in New York has increased the required deposit for coffee futures trading to $5,500 from $5,000.

Sources:

  • "Coffee Prices Jump Amid Drought Worries" ( Reuters, no date )
  • "Commodity Research Bureau's Index" ( Commodity Research Bureau, no date )
  • "Coffee Prices Rise Amid Brazilian Drought" ( Bloomberg, no date )
  • "Brazil Imposes 10% Tax on Sugar Exports" ( Bloomberg, no date )

Read more