Like crude oil or silver, the trading pattern of coffee futures is closely linked to the U.S. dollar. When the greenback falls - as it has in the past year - the commodities priced in U.S. dollars rise, as producers seek to recoup their costs in revalued local currencies. This month's recent pullback in coffee prices was mirrored by a rally in the U.S. dollar.
Meanwhile, the U.S. financial system is awash in liquidity as a result of the Federal Reserve's extraordinary "quantitative easing," as much of that money has found a home in commodity markets.
"There is really next to no regulation any more in commodity markets, and that is a real issue," Mr. Rhinehart said. "A lot of money is pouring into commodities because it can't find a better risk/reward equation right now."
But he added that speculators are betting on commodities because of underlying factors, and in the coffee market, that means the inability of producers to keep up with demand growth.
Seeking a solution
The key to avoiding the peak coffee scenario is boosting productivity, and many growing countries are attempting to increase yields by replacing old coffee trees with disease- and pest-resistant varieties.
Brazil is one country that has succeeded in raising production in recent years, as its coffee production comes from larger, more mechanized flat-land farms. But in Africa and Central America, coffee producers remain under pressure.
In Colombia, the Coffee Growers Federation has established a loan program to encourage its 553,000 members to rejuvenate their fields by cutting back old plants and replanting with disease-resistant varieties.
Even as Colombian producers struggle to boost production, they are working to meet the changing demands of global coffee consumers, who increasingly want high-quality "specialty" grades and certifications like the "fair trade" socio-economic seal or the Rainforest Alliance environment program.
Overall demand is growing, but demand for high-end "specialty coffee" is climbing even faster, especially as growing countries like Brazil and Colombia develop a more refined taste for their own product.
Brazil is soon expected to overtake the United States as the largest buyer, consuming 23 million bags of their own coffee annually compared with 1.5 million bags 30 years ago. Colombians used to joke that you had to leave the country to have a good cup of Colombian coffee, but now Juan Valdez coffee shops are sprouting up in all its major cities.
Canadian coffee drinkers are considered among the more discriminating in the world, in terms of demanding high-quality coffee. Canadian consumption has continued to climb through the recession, while it has been stagnant in major markets like the U.S. and Europe.
Specialty coffee chains like Starbucks and Second Cup are competing with new arrivals like Ottawa's Bridgehead, which boasts that it sells "fairly traded, organic and shade-grown coffees from small-scale farmers," and Vancouver's Forty Ninth Parallel, which emphasizes a gourmet approach to coffee as an "experience for the senses."
But with prices so high, producers are less interested in jumping through the hoops to obtain "fair trade" or Rainforest certificates. Mr. Samper, of the Coffee Growers Federation, said such certifications can be extremely expensive for small growers to maintain and the premiums paid are not worth it when prices are high.
Even the higher prices haven't deterred Canadians from indulging in their morning "double double" or non-fat latte. In the past five years, Canadian coffee consumption has climbed 17 per cent, and 40 per cent in the past decade.
"That's significant and well out of step with the other traditional importing markets where you are seeing very low rates of growth," said Sandy McAlpine, president of the Coffee Association of Canada.
It's no wonder then that Mr. Villota is looking to expand his sales to Forty Ninth Parallel, which has recently began purchasing his "Quintuple Selection" San Alberto premium coffee. He is also exporting his branded product directly to buyers in South Korea and Sweden.
His family invests heavily in the business - to rejuvenate the crop with new disease-resistant plants, to maintain the use of fertilizers and pesticides, and to expand its marketing including attracting the growing tourist trade with guided visits and a terraced coffee bar with a spectacular view.
But while prices have climbed in U.S. dollar terms, the Colombian peso has climbed dramatically against the dollar, limiting the upside to farmers in their local currency, while yields are down and costs are skyrocketing. As a result, many small growers can't re-invest and Mr. Villota questioned the viability of the 1.8-hectare family farm.
"Even though the price is high in U.S. dollars, they are just surviving," he said. "In my opinion, it is not sustainable for them."