Coffee futures prices nearly double only because Brazil suffers from extreme weather

According to statistics, ICE coffee futures 'cumulative gain in February (42%) hit a new high since June 1994, and the contract's highest monthly gain occurred in June 1975 at 59%. As of Wednesday's close, ICE listed U.S. coffee futures surged 9 percent to $2.02 a pound, the highest since May 3, 2012. This year, the futures have soared 79%.

What caused the coffee futures price to soar? The answer is Brazil's extreme weather.

Coffee futures traded on the Intercontinental Exchange hit a nearly two-year high yesterday and nearly doubled their gains this year as global coffee bean prices surged as Brazil, the world's largest coffee producer, suffered its worst drought in decades and record temperatures.

Brazil suffered its worst drought in 50 years, while the average temperatures in January and February were the highest in at least 30 years. On the other hand, Brazil is the world's largest coffee producer, accounting for 40% of global coffee production. Once its production drops sharply, it is bound to cause an imbalance between supply and demand of coffee beans and price increases.

Some overseas analysts believe Brazil is likely to lose a third of its expected coffee harvest due to extreme weather. According to the US Department of Agriculture (USDA) report, Brazil is expected to produce 53.1 million bags of green coffee in 2014, down 5% from 2013.

SomarMeteorologia, a weather forecaster, said rainfall in Brazil's coffee-growing regions would weaken after this week's cold front, and the coffee-growing regions of southeastern Brazil were facing their driest summer since 1972. Brazil's limited rainfall has made it difficult to predict the full year's coffee harvest.