Trade view /
28 September 2016 at 9:33 GMT
The “International New York Times” has reported that climate change is posing a serious threat to coffee and coffee farmers. The paper cites the Climate Institute (Australian non-profit) that was commissioned by Fairtrade Australia and New Zealand, the regional hub of the global Fairtrade system.
Not a pioneering work in terms of new evidence, however, the drawing together of facts from current research offers a conclusion that climate change will have a serious impact on the world’s coffee supply. As the chart below suggests, prices have already started to react.
Source: www.investing.com Spotlight Ideas
The key points are:
- Rising temperatures pose a sharp risk to farmland, reducing the global area suitable for coffee by about 50%.
- Warmer weather is exacerbating the threat of diseases like coffee rust and pests like the coffee berry borer beetle.
- In 2011 this pest caused such devastation that it led to annual losses of hundreds of millions of dollars in coffee beans.
The impact of warmer weather and increased pest incidence will see a deterioration in the availability and quality of land within the global “bean belt,” i.e. Colombia, Mexico, Brazil, Ethiopia and Vietnam.
Major coffee collectives and users such as Starbucks have been offering support to farmers in order to find ways to preserve if not improve their land and yield levels. However, the report would suggest that such solo efforts, even by a major player such as Starbucks can not tackle the challenge of climate change on its own.
The impact could be devastating on the livelihoods of many individuals around the world and whilst not wishing to cash in on misery, the market is there to be traded and the time-based technicals paint a bullish picture.
Source: www.investing.com, Spotlight Ideas
Coffee 5-year chart:
Source: Spotlight Ideas
Management and risk:
Parameters: Coffee Dec 16 (KCZ6)
Entry: Buy 154.15. 0829 GMT
Targets: 163 ... 169 ... 185
Time horizon: Strategic trade
— Edited by Clare MacCarthy
Non-independent investment research disclaimer applies. Read more