As Brazil Coffee Drought Disaster Grows Will 2 1/2-Year Highs Result In A More Expensive Cup of Coffee?

From the Wall Street Journal’s veteran market reporter Alexandra Wexler

By ALEXANDRA WEXLER

OCT 6 (Wall Street Journal)–The sharply rising price for coffee beans means that morning cup of joe could soon get more expensive–again.

Arabica-coffee prices surged to the highest level in 2½ years on Monday as dry weather in Brazil raised concerns about next year’s crop.

Coffee prices have nearly doubled this year as a lack of rainfall clipped output from the world’s biggest coffee grower and fueled worries about how already weakened trees will fare next season. Brazil is the source of one-third of the world’s coffee and about half of the world’s arabica beans, which are prized for their mild flavor and used in gourmet blends..

Consumers were already hit with a wave of price increases this summer by big roasters like Starbucks Corp. SBUX -0.32% and Folgers maker J.M. Smucker Co. SJM -0.44% Now, traders and investors say the return of dry weather in Brazil could keep prices high for years to come, particularly if the perennial trees are damaged.

“Brazil is to the coffee market what Saudi Arabia is to the oil market,” said Harish Sundaresh, commodities strategist at Loomis, Sayles & Co., a Boston investment adviser that manages about $220 billion. “If Brazil falls off a cliff it would definitely get the market worried.”