[video] Quick Take: Coffee Prices Surge as Brazil Crops Are Hurt by Dry Weather
NEW YORK (TheStreet) -- Coffee prices continue to rocket higher because of traders' concerns over dry conditions in Brazil. TheStreet's Debra Borchardt said Arabica coffee beans are up 9% on Wednesday, the largest one-day gain since November 2004.
Coffee prices have rapidly risen 38% year-to-date, to a 13-month high of $1.5265 per pound.
Brazil, the world's largest supplier of coffee, has already lost 5% of this year's crop due to the extremely dry conditions experienced at the start of the growing season, Borchardt said.
A few ways investors can play along are through the iPath Dow Jones-UBS Coffee Subindex Total Return ETN (JO), which is up more than 18% in the past two days, and through the iPath Pure Beta Coffee ETN (CAFE), which is up by roughly the same percentage in the same period.However, despite the jump in coffee prices, consumers are unlikely to feel the pinch just yet.
Borchardt pointed out Starbucks (SBUX), Dunkin' Brands (DNKN) and Green Mountain Coffee Roaster (GMCR) buy their coffee beans in advance to avoid the volatility from short-term market swings. These big buyers won't be back in the coffee market for several months, by which time things might have settled down, she said. -- Written by Bret Kenwell in Petoskey, Mich. Follow @BretKenwell
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