Why El Niño Could Mean More Bad News For Coffee Prices

Coffee prices are up about 90% year-to-date.

A drought in Brazil and leaf rust in parts of Central America have helped push prices higher.

And now El Niño is coming.

El Niño is a weather phenomenon that tends to bring dry weather to Asia and Australia, and a lot wetter conditions to South America.

“If El Niño leads to lower output from Indonesia and Vietnam (25% of global coffee production) as seems likely, prices may stay high for longer,” writes Caroline Bain at Capital Economics.

That being said El Niño is a “transient event,” and prices should weaken as weather conditions normalize.

Meanwhile, inventory of sugar and rice are at “comfortable levels,” and dry weather in South East Asia and Australia isn’t expected to see much of an impact on those commodities, according to Bain.

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