Coffee to rise in price due to Colombian speculators

Coffee farmers in Colombia, the world’s No. 2 arabica producer, have failed to deliver up to 1 million bags of beans this year or nearly 10 percent of the country’s crop, leaving exporters, traders and roasters facing steep losses, Report informs referring to Reuters.

World coffee prices have soared 55 percent this year, mainly due to adverse weather in top producer Brazil, prompting Colombian farmers to default on sales clinched when prices were much lower in order to re-sell the coffee at higher rates.

Delivery defaults in a major producer like Colombia can exacerbate price spikes on world markets, although these would be temporary because the coffee ultimately exists and will weigh on markets once it is re-sold.

Colombian farmers say they will deliver the coffee later this year or next but buyers are unconvinced.

Many are opting to see losses now and write the purchases off as defaults rather than wait and risk even bigger losses if farmers still don't deliver next year and prices rise further, according to a senior trader at another global trade house.