Why Coffee Makes People Happy: The Science Behind the Smiles
Weekly price of Arabica Coffee Futures Contract (100lb)
Major hailstorm hits Brazil coffee crops. Although the C-futures have dropped over 40% in the last month, this is not fundamentally reflecting what is occurring in Brazil (the largest supplier of Arabica coffee). There is a supply crunch during a time of record demand as more and more consumers move to specialty coffee. The current price seems to be favoring the technical traders as the price of $KC was showing signs of distribution; as price action broke down, traders shorted the commodity down to a 52-week low.
Reporters in Brazil are predicting that the outlook for 2023 is “NOT looking good” (Maja Wallengreen). Maja is out in Brazil to investigate the damage that this hailstorm has caused and her findings are concerning; the one who takes the biggest hit is the farmer who is forced to sell for record low prices on an extremely tight supply crunch.
Some of our producers in Oaxaca also tell us that this year’s storms have destroyed over 50% of their crops and will do their best to sell their coffee beans at a premium to ensure the stability of their farm and community; and as importers and roasters, we will be glad to pay the premium in order to support the sustainability of this commodity.
In other words, there is “the market” and there is “the producer”. The market sometimes disconnects from reality especially during times of economic uncertainty given a currency crisis. Fundamentally speaking, the price of coffee is much too low in order to support the sustainability of coffee. Karajillo supports farmers by paying a premium and searching for Fair Trade certified coffee to promise us a bright future for this industry.
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