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Coffee drinkers should brace for even pricier morning brew

NEW YORK--Your morning cup of Joe may be about to get even pricier, a Reuters poll of 11 traders and analysts showed on Thursday, July 28. By the end of this year, both arabica and robusta coffee are expected to hit their highest price since earl...

A farmer shows his coffee beans at his farm in the San Martin region of Costa Rica, July 4, 2016. REUTERS/Janine Costa
A farmer shows his coffee beans at his farm in the San Martin region of Costa Rica, July 4, 2016. REUTERS/Janine Costa

NEW YORK-Your morning cup of Joe may be about to get even pricier, a Reuters poll of 11 traders and analysts showed on Thursday, July 28.

By the end of this year, both arabica and robusta coffee are expected to hit their highest price since early 2015, driven by the global market's first supply deficit in six years, along with firming currencies in top growing nations and strong demand for coffee.

For robusta, usually blended with higher quality arabica beans or used in instant coffees, the survey was particularly dramatic as El Nino-related dryness in southeast Asia and drought in Brazil damaged crops and drained supplies, traders said.

Robusta coffee futures were forecast to rise to as high as $1,900 per tonne by the end of September and $1,985 by the end of 2016, with year-end forecasts ranging from $1,575 to $2,300.

That would be up 10 percent from Wednesday, and a whopping 30 percent jump from 2015, its biggest annual gain since 2010.

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Prices of arabica coffee, used in espressos and brewed blends, will rally to $1.45 per lb by the end of the third quarter and to $1.60 by the end of the year, the median of estimates showed, with expectations ranging from $1.20 to $2.20.

That would be up 13 percent from Wednesday and a 26 percent increase from 2015.

While bean inventories in producing countries have already dwindled, the threat of frost in Brazil next year and rains in Vietnam due to the La Nina weather pattern could spur greater price gains, said Shawn Hackett, president of Hackett Financial Advisors in Boynton Beach, Florida.

"Any kind of major weather threat could send ... coffee prices back up to retest the 2011 highs near $3 per pound," he said.

Respondents said the Brazilian real, which rose to an 11-month high in June, was also likely to drive the market. A strong Brazilian real against the greenback discourages producer selling of the dollar-traded commodity.

The price forecasts mark a major about-turn from the outlook at the start of the year.

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