Recently Brazil, the main producer and supplier of Arabica coffee, has suffered major economic turmoil. Its currency decreasing against the US dollar has driven exports, making foreign trade more profitable when sales made by a strong dollar are converted back to the Brazilian real.
Brazil’s currency hit a 12 year low against the dollar in March due to the government’s budget deficit and ambiguity over its economic outlook.
Despite unsteady fluctuations in the real, the Brazilian government has recently implemented measures to boost the country’s lethargic economy. This step has more or less relieved selling strains in the coffee market. As a result, investor confidence has been gained as they now wait for the next flow of production from Brazil which is expected to begin early June.
According to the International Coffee Organization (ICO), the coffee industry continues to grow, with Brazil exporting a total of 36.8 million bags of coffee beans in 2014-2015 harvest year, which was 12 percent higher than the year before. However, “export availability is going to be significantly reduced over the next year,” said the ICO.
Coffee, an enticing beverage which has been embraced by many cultures since the 6th century, is the second most traded commodity after oil. It is also an important source of revenue for many developing nations and is harvested by approximately 25 million farmers across the globe.
Arabica, which is highly sensitive to warmer temperatures, faces the risk of a shortfall as climate change threatens production. This in turn impacts on the global market, with a reduction in supply leading to higher prices.