By Tony D’Altorio, Investment U Research Tuesday, May 10, 2011

Coffee drinkers are finding it more and more expensive to get their caffeine fix. The commodity’s price recently surpassed the key US$3 per pound level for the first time in over 34 years. And with roasters scrambling to secure scarce supplies of Arabica beans, costs could remain high for a while. The International Coffee Organization (ICO) certainly warns as much. It points to global inventories falling to a mere 13 million bags, their lowest level in 50 years. Worse yet, they have little chance of replenishing those numbers this year.

The Weather Outside Is Frightful

As with so many other commodities, poor weather bears the brunt of the blame for coffee’s price hike. In Columbia, for example, output plunged to a 33-year low of 7.8 million 60-kilogram bags in 2009. Supplies did rise to 8.9 million bags the next year, but it expects to barely match that amount in 2011. Mexico also suffered a bad crop this year due to low temperatures. And several Central American countries have also experienced problems. Then there’s Brazil, the world’s largest coffee producer. It already worried the market recently with its 13 percent production drop in medium quality beans.

Now another weather phenomenon threatens the country’s coffee crop. Local meteorologists explain that as La Nin