STORY: Global coffee prices have soared to their highest in nearly 50 years.

Poor weather in Brazil and Vietnam have forced roasters such as Nestle to raise prices.

Spiking costs will benefit farmers with the crop this year.

But that means a challenge for traders.

They face crippling hedging costs on exchanges, and a scramble to receive the beans they pre-bought.

:: WHAT DRIVES PRICES?

Bad weather plays a major role in price fluctuations.

Production problems linked to weather conditions in Brazil and Vietnam have seen global supplies lagging demand for three years.

That has left stocks depleted and driven benchmark ICE exchange prices to a peak of $3.36 per lb.

Last time coffee traded that high was in 1977 when snow destroyed swathes of Brazil's plantations.

Experts are meanwhile predicting yet another year of lackluster coffee output.

Brazil produces nearly half the world's arabica.

That's high-end beans used primarily in roast and ground blends.

The country has experienced one of its worst droughts on record this year.

Experts say the trees are producing too many leaves and too few of the flowers that turn into cherries.

In Vietnam, which produces some 40% of the robusta beans typically used to make instant coffee, a severe drought was followed by excess rains since October.

:: WHY ARE TRADERS WORRIED?

Brazil-based traders Atlantica and Cafebras are seeking court-supervised debt restructuring.

That's due to coffee price surges, crippling hedging costs and delivery delays.

Court-supervised debt restructuring precedes bankruptcy if the negotiation is not successful.

Traders who buy beans from local suppliers like Atlantica and Cafebras typically take short positions in the futures market to hedge their physical market exposure.

Fearing they might no longer get their physical coffee, many traders are closing out what have become loss-making short futures positions.

:: IMPACT ON ROASTERS AND CONSUMERS

Surging coffee prices are a problem for roasters.

The boss of Nestle, the world's biggest coffee firm, was ousted earlier this year after the board grew unhappy about weak sales and a loss of market share, as consumers switched to cheaper brands.

Roasters tend to buy coffee many months in advance, which means consumers will likely see the price spike in 6 to 12 months.