Bad weather causes coffee price to soar

Robert Laing

Robert Laing

Never mind gold or oil, buy coffee. The "coffee and tea" item in August's producer price index (PPI) basket showed the biggest month-on-month jump of 12,6percent.

Coffee defied August's general slump in commodity prices, which saw "crude petroleum and natural gas" fall 7,8percent, bringing oil's annual inflation to zero.

The International Coffee Organisation said August's price jump was partly due to hurricanes destroying coffee plantations in key Caribbean growing areas like Cuba and Haiti.

While Brazil is expected to produce a record coffee crop this year, its growing domestic consumption means its exports are likely to drop.

The higher price manufacturers paid for coffee last month is likely to cause the consumer price index entry for "coffee, tea and cocoa" to jump sharply from August's 4,4percent monthly increase when this month's consumer inflation data is released.

The overall PPI increased slightly to 19,1percent from July's 18,9percent. This was under the consensus figure of 19,5percent from economists polled by I-Net Bridge, making August's PPI the first inflation figure to come in lower than expected this year.

Electricity rose one percent after July's 26percent surge from Eskom's winter tariffs.

With the exception of coffee, most commodity prices have dropped substantially, boding well for PPI falling in the coming months.