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Coffee Prices Set To Drop While Starbucks & Nestle Reap The Rewards

Brazil's coffee futures has now hit a 29 month low, and it's benefitting some hefty coffee giants.

As reported by Fortune this past Tuesday, what's considered to be one of the country's most popular exports has continued to suffer greatly. A big reason for this is because their currency, the Brazilian Real, going down against the U.S. dollar. This trend began at the end of 2016, when the South American country's coffee exports reached just 19 percent, only to tumble yet again down to 17 percent.

Experts believe that one reason for this has to do with the negative trends in the Brazilian real's currency exchange rate. Trading Economics has predicted the real to trade at 4.02 on the dollar by the end of this quarter. While better than the 3.9 rate from last quarter, it still doesn't fix the issue at hand. The Brazilian Real also dropped to as low as 1 percent after dropping 15 percent in the second quarter.

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There have been a couple of other reasons that Brazil's coffee exports have suffered. A delayed harvest of coffee beans hit the country back in early June, according to Reuters, and a truckers' strike left farmers with difficulties in getting the product. It got so bad that some have considered buying coffee beans with different origins just to tie them over until they can get the real thing.

Brazil's outputs have already hit a record this year, as their coffee has only grown cheaper in response. While that's not very good news for them, the price drop is great news for companies such as Starbucks and Nestle, as they would be able to get more coffee beans without spending more money. Arabica coffee delivery fell 3 percent at $1.1165 a pound, the biggest most-active contract dip since October 11, 2018.

With the future of Brazil's coffee exports looking bleak- and the futures of Starbucks and Nestle looking brighter than before, it will very interesting to see what happens next. It would be best if the Brazilian real was able to recover, but the predicted trends have made that possibility slim. But with harvests on and no truckers' strike in sight, perhaps there is a small glimmer of hope for the South American country to recover from this. Until then, big coffee giants will reap the benefits as Brazil tries to pick up the pieces.

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