The gold price has been dominating headlines – at least in the commodities space. But continued US dollar strength is also having a deleterious effect on a range of soft commodities. With an intensifying El Niño system that will generate ripple effects on weather patterns all over the world, soft commodity markets could experience increased price volatility through the remainder of this year and into the early part of 2016.
A glance at the accompanying graph might make you think twice next time you hand over £3 or so for your double espresso skinny latte. Coffee prices have fallen away dramatically in the early part of this year due to a weaker Brazilian real, combined with favourable harvest conditions and an expected rebound in inventories - Brazil provides around half the world's high-quality Arabica coffee beans. Could we be about to witness a rebound in prices? In the past, the El Niño effect has proved to be generally positive for coffee prices, although each El Niño event has differed in severity and regional characteristics.
