CAFFEINE JITTERS

Plunge in coffee-bean prices threatens specialty blends in fancy shops,

The dramatic plunge in coffee prices has gotten so bad that it’s threatening to claim its next victim: the specialty blends used by fancy coffee shops and discerning home brewers.

On the futures market, arabica coffee — the smoother variety favoured by companies like Starbucks Corp. — is languishing near a 13-year low. Growers in Brazil, the world’s biggest exporter and producer, have expanded output and become more efficient, collecting more beans for every planted acre. The result is a huge glut that’s sent prices below break-even in many countries, sparking fear producers will leave the industry.

Some of the hardest hit farmers are in Central America, home to specialty varieties like the Geisha beans grown in parts of Costa Rica. There’s a double whammy when futures prices fall.

Since many specialty producers plant fields with beans deliverable against arabica-futures contracts, along with premium beans, it cuts into overall profits.

The broad downturn for the market at a time of oversupply also erodes and sometimes even erases premiums for higher-grade coffee.

“The fundamental dysfunction is often times farmers will sell coffee at a price that doesn’t allow them to have a sustainable livelihood,” said Peter Giuliano, chief research officer for the specialty Coffee Association, which represents producers, baristas and roasters. It’s not happening everywhere in the market, but it’s “happening often enough that we see it as a crisis,” he said.

If producers do pull back, it could eventually help prices to recover as the market shifts from surplus to deficit.

Some traders, such as Marex Spectron, are even hopeful the rebound could be on its way soon.

On Monday, July futures rose as much as 1 per cent.

But most investors are gearing up for a period of prolonged rout.