Get ready for higher coffee prices

Perfect storm brewing ... coffee prices are set to rise as harvests decline in Brazil. Source: News Limited

THAT cup of morning coffee is going to cost you a few more beans very soon.

Brazil's Arabica coffee prices have recently surged 94 per cent, to $US2.144 for half a kilogram ($2.30) on the New York futures market.

The harvest in Brazil, which accounts for more than a third of world output, will drop more than expected in the 2014-2015 season to 49 million bags "with the risk towards a lower number," Marex Spectron said in a report last week — down from a January forecast of 55 million and last year's crop of 53.3 million.

That decline will leave global production 7.1 million bags below demand, Marex Spectron said. That would be the biggest deficit since the 2009-2010 season, US Department of Agriculture data show.

The price spike is a result of bad weather in Brazil.

First, growers were hit with a sustained drought during the growing season brought on by El Niño tropical weather.

Then, at harvest time, flooding hampered collection of the few remaining crops.

"Nobody is absolutely sure about how big the deficit will be this year," said Rodrigo Costa,

of Newedge Group. "The supply outlook definitely looks tighter than it seemed three months ago. The situation has deteriorated."

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