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Dry Brazilian weather means high prices for coffee beans

Analysts are expecting the cost of a cup of coffee to rise.

By
Ed Adamczyk

SAO PAULO, Oct. 6 (UPI) -- Arabica coffee bean prices soared to their highest price level in nearly three years, with Brazil's dry weather causing worry about next year's crop.

A third of the world's coffee is grown in Brazil, as is half the in-demand Arabica coffee beans, and traders and investors believe the return of dry weather could keep prices of the beans high for years to come. Coffee prices have nearly doubled this year because of the lack of rainfall in Brazil.

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Arabica futures, for December delivery, were up 7.1 percent at $2.21 per pound, and coffee analyst Harish Sundaresh noted, "Brazil is to the coffee market what Saudi Arabia is to the oil market. If Brazil falls off a cliff it would definitely get the market worried."

U.S. coffee roaster J. M. Smucker Co. announced a 9 percent price increase in June, raising the price of Folgers and Dunkin Donuts coffee. Starbucks Corp. and Kraft Food Group Inc. followed with price increases of their own, and another increase seems likely.

"If there isn't any rain, then certainly Starbucks and those guys will be feeling some pain," said Jonathan Camarda of Camarda Wealth Advisory Group. "You're looking at definite further upside (of prices)."

The 2014 coffee harvest in Brazil was the smallest in three years.

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