Coffee Prices Are Likely To Rise, Says Sunny Verghese

According to Sunny Verghese, the chief executive of Olam International, coffee prices will shoot upwards in the near future.

Verghese, the chief executive of Olam International, a Singaporean-based soft commodity training company, believes the industry will break free from the shackles of the past six months.

Obviously, if prices do rise then it would be great news for the farmers who have had to contend with seeing very little in the way of recompense for their hard work.

“Because of the Colombian peso devaluation, the Brazilian real devaluation and devaluation in most of the producing countries’ emerging market economies, the fundamental supply/demand scenario is not being fully reflected,” he said.

To put it plainly: the market is not reacting to the depreciation of national currencies. That, though, is likely to change.

That, though, is likely to change.

As well as a more balanced exchange between local currencies and the United States dollar, the potential crop shortages in some of the world’s largest producing nations will (finally) see about an upturn in prices.

“If…there is lower crops [and] a fairly stable demand for coffee, a fairly predictable demand for coffee, we would warrant the prices to be much higher than where they are today,” he said.

Speaking to investors, Verghese specifically mentioned that El Nino had played havoc with crop projections in Brazil and Colombia, South America’s two biggest coffee growing countries.

“We are seeing Brazilian crop revised downward [and] the Colombian crop has been lowered by, what, about one million bags,” he related.

As well as impacting coffee harvests in South America, El Nino looks set to seriously impact production levels in Indonesia.

So could we finally see a rise in the price of coffee?