Speculators Blamed For Soaring Coffee Prices

Coffee prices have been volatile in recent months. They first surged to a 14-year high in May, excessive rainfall in Colombia was blamed for surging prices, as supply concerns eased however, prices fell. In July prices were up 20.7% from a year ago, and early this month coffee prices surged again over concerns that frost in Brazil could have damaged coffee crops. 

Industry experts however think it is more than just supply and demand, and blame financial speculators for the volatile prices. They argue that increasing coffee consumption in China and Brazil coupled with weather-related drops in production set the stage for Wall Street speculators to enter commodity markets and speculate on coffee contracts for future delivery, according to McClatchy.

Even the volume of trading in coffee futures has gone up after rules for investment in commodities markets were relaxed in 2001.

Here’s a look at how coffee futures have traded in 2011:

coffee futures