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A story about Coffee, disasters and investors ☕

How a disaster in Brazil affected the global price of coffee. And how both are directly connected to CFD trading.

You probably start your day just like us – with a cup of hot coffee. And then another cup, a bit later on. And if you ever thought who benefits financially from yours (and half of humanity’s) favourite refreshment drink, you probably came to the obvious conclusion – coffee production companies and international resellers. But you probably didn’t think that the global production of coffee and the dynamics of its value can actually work for you. And here’s how.

First, have a look at this chart. ⬇️

source: markets.businessinsider.com/commodities/coffee-price (March 5th 2019)

It shows the way coffee price changed during the last 5 years. Whereas in the beginning of 2019 it was in a 5-year low and you will notice two major price peaks – in 2014 and 2017. There is one major reason for that: a sudden drop in coffee production, due to the catastrophic droughts in Brazil, the leading producer in the world (well ahead of Vietnam and Columbia).

source: wikipedia.com (2014)
The 2014–17 Brazilian droughts were the most severe ones in a century and affected more than human lives and health. Brazil’s agriculture was hit hard. And so was the country’s coffee production - droughts wiped out 1/3 of coffee crop in some areas and that lead to a 50% rise of global coffee prices 😱 before the end of 2014. The same happened in 2015 and 2016, as droughts continued and Brazilian agriculture could not recover.
 
And while this was a nightmare of a time for Brazilian economy, it was a heavenly period for people who invested in coffee CFDs 😇 who saw their investments soar.
 
But how does that concern you? As early as January 2019, Bloomberg published an article with a very, very clear headline: “In Brazil Heatwave, Coffee is Literally Burning on the Trees” . Furthermore, Bloomberg cited Brazilian producers, who state "Some farmers are forecasting losses of 10 to 15 percent. We will produce less, for sure, while we can’t estimate anything so far.” That might be a coffee investment opportunity as the price of coffee might start going up once again.

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