Coffee Prices on the Way Up Again
Certainly the weather has been screwy in the South American country that is the No. 2 two exporter of coffee beans to the U.S. The mountain climate has been warmer and wetter than usual, retarding growth and enhancing conditions for coffee rust, a fungus that attacks coffee plants. The type of coffee bean grown in Colombia and Brazil, Arabica, is particularly valued for its rich-yet-mild flavor and lower caffeine.Yields from Colombia have dropped from 1.58 billion pounds in 2006 to 1.14 billion in 2008, 1.07 billion in 2009 and 1.2 billion in 2010. According to the International Coffee Organization, world stocks are now at their lowest levels in years.
The coffee market has seen a rapid rise in the price of coffee futures, from $2 a pound in December to $2.85 today.
Softening the price blow to some degree is the production in Brazil, the leading exporter of Arabica beans, which had a robust 2010 crop (but is expected to have a lesser yield in 2011). Adding to the price stress is increased demand for coffee in developing countries.
Where will you see the impact? If you buy bean coffee, you probably already have; the shelf price of brands such as Folgers and Maxwell House has already crept up.
Merchants of brewed coffee like Starbucks are holding back on price increases for the time being, but can't do so forever. It's worthwhile to note, however, that the coffee beans represent only around an estimated 15% of the price of a cup of coffee in a coffee shop.