Coffee continues to become cheaper at an incredible pace, which leads to desperation by many farmers in Central and South America. They tend to abandon their farms in practice, raising fears of a possible crisis in the industry.
“Volatility destroys the livelihood of farmers,” says John Steel, CEO of Cafedirect. Steel also highlights the fact that farmers are considering migrating to other countries, and young people are starting to give up this business in many of the producing countries. The fall in prices has led many of the producers to leave their farms in Guatemala, and farmers in Colombia have been redirected to coca production, which is subsequently transformed into cocaine.
The weakening of the currencies of coffee producing and exporting countries further exacerbates international coffee prices.
Brazil’s harvest is expected to shrink this year, with the government forecasting 50M and 55M 60-pound coffee, which is 15% lower than last year’s record-breaking yield.
“The terrible market dynamics and low prices are driving many producers out of the market, which will affect overall production in Central America in 2019 and 2020.” – says James Hearn of Marex.
Source: The Financial Times
Trader Martin Nikolov