Will fungus send coffee prices higher?

At least some packagers are cutting retail prices, if not your local Starbucks. However, a coffee-killing fungus outbreak could revive climbing prices later this year.

By Bruce Kennedy Feb 20, 2013 10:11AM

Image: Coffee (© HD Connelly/Getty Images/Getty Images)Here's some more news to keep you awake at night: It looks like coffee prices might go through a mood swing of sorts as the year progresses.


A global shortage of coffee beans sent prices in the U.S. percolating up to around $3 a pound in 2011. But since that peak, coffee prices have yet to stop falling. According to Brian Murphy at the Small Cap Network, it's currently trading at around $1.40 a pound.


The price drop is being attributed partly to several recent record coffee crops in Brazil, which produces about a third of the world's coffee. Reuters reports that Arabica beans, the type used mostly in brewed blends, have fallen to their lowest levels in two-and-a-half years.


In fact, J.M. Smucker (SJM), which produces the Folgers and Dunkin' Donuts coffee brands, announced on Tuesday it was decreasing the price of most of its packaged coffee products sold in the U.S. by an average of 6%, "in response to sustained declines in green coffee costs."


Other coffee sellers are expected to follow suit -- although Kraft Foods (KRFT), which makes Maxwell House coffee, told Reuters it has "no news to share at this time" about any possible changes to its coffee prices.


But lower retail prices probably won't effect the price of your morning cup at Starbucks (SBUX), Caribou Coffee (CBOU) or other coffee shops and restaurants. Brian Murphy says that's because coffee companies are like gas stations. "Once you become accustomed to a higher price," he notes, "they never quite lower it back to prior low levels...even if the underlying commodity (like gas, coffee, or whatever) does fall back to prior lows."


In the meantime, The Wall Street Journal quotes coffee sector analysts as forecasting that oversupply is going to keep prices dropping for at least the first half of 2013. But a wild card is also at play -- a bean-destroying fungus that's reportedly spreading across another important coffee-growing region, Central America.


Honduras, Guatemala and Costa Rica are all expecting significant drops in coffee production due to the disease. And those reductions could be felt market-wide by October, when the next coffee season starts.


More on moneyNOW

36Comments
Feb 20, 2013 11:07AM
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Coffee prices at the store are NOT, repeat, NOT going down, precisely the opposite is happening.
Feb 20, 2013 12:41PM
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Must be a Fungus in our gasoline supply pipelines too!!??
Feb 20, 2013 12:09PM
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Anyone that pays those over inflated prices for a cup of coffee is throwing their hard earned money right out of the window.  That cup of coffee cost the retailer about 35 cents and they are charging $4.50.  That's some mark up.
Feb 20, 2013 12:21PM
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Without a doubt speculators are buying up coffee as they have done with oil and gas. Just as there are leeches on the bottom, there are sharks on the top ready to eat away at our paychecks.
Feb 20, 2013 12:56PM
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I'm gonna have to give up coffee too. Damn, I already gave up cigarrettes, cigars, marijuana, acid, cocaine, mushrooms, beer, wines, liquors, sodas, sweetened iced tea, chocolate milk, cookies, cakes, pies, pizza, hamburgers, french fries, sugar, crisco, vegetable oil, chocolate,  bread, fried chicken, bacon, sausage, bologna, twinkies, ice cream, popsicles, steaks, butter, margarine, drinking water from the tap, salt, pickles, ketchup, mustard, mayonnaise, sex, making love, exercise, jogging, stretching, work, watching tv, going to sporting events, driving, walking, typing(well not yet), reading, talking, going to the doctor, well, I didn't give up all of these, I just gave up work and water from the tap. hehe.
Feb 20, 2013 12:51PM
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Whatever you do, DO NOT spend hard earned money at coffee houses!  I learned years ago to make a large pot of coffee about once a week (sometimes twice a week) but as soon as it is done, shut off the machine, let it cool down & put it in a sealed container (glass is best) in your refrigerator!  Then, each morning pour yourself a cup & reheat it (not to boiling) in the microwave.  You aren't wasting any coffee, it tastes fresh & delicious as the day you first made it.  I do not waste which is something I have always tried to do but I do not spend a fortune for coffee at shops which are generally robbing the public, either. 
Feb 20, 2013 1:03PM
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BStacy and Balloons

I am with you. Make it yourself. Save that money for vacation, retirement, etx. 

Feb 20, 2013 2:00PM
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I refuse to buy coffee from Starbucks! I can get better coffee at home besides I can compost the coffee grounds and filters for my flower beds! :)
Feb 20, 2013 1:22PM
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Coffee prices have not gone down any that I can see. Although I do not think spending money on coffee is throwing money out the window; to stop buying it is the only way to wake up these companies.
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You can mess with my dogs,wife or even my truck but darned leave my coffee alone.

Coffee, Gas and water is getting out of hand.

Feb 20, 2013 2:20PM
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The Good Life ~

With the huge price hikes in store bought coffee over the past couple years one would think that Juan Valdez is now cruising around Columbia in a Lamborghini roadster with a grin on his face, a $50 Macanudo in his hand and a Playboy bunny riding shotgun. Hopefully the news about some coffee price cuts at the supermarket are the real deal.

 

Peace to all ~

Feb 20, 2013 2:29PM
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Most gas stations have better coffee for a buck vs. over two bucks from Dunkin Donuts.
Feb 20, 2013 2:23PM
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Coffee prices for a cup at Dunkin have not decreased.  In fact, they went up.  And in the grocery store it's the same story.  I have noted that McDonald's has reduced prices, charging $1 for any size cup of coffee, and some convenience stores have also cut prices with similar specials.  As far as restaurants, no change in prices there.

And let's not forget that coffee used to come in 1 pound bags and cans.  Today the vast majority of coffee is not a pound, a change they made years ago to keep coffee prices on the shelf the same while they accommodated an increase in coffee bean prices.  A can or bag of coffee now runs anywhere from 10 ounces to 13 ounces.  We're talking 20% to 40% less coffee in the bag with no corresponding decrease in price then, no price drop when bean prices dropped, and no price drops coming in the future.

For a moment, let's forget coffee shop coffee and just look at coffee that you buy at a grocery store to prepare at home.  It seems that the price of beans has dropped from $3 a pound in 2011 to its current price of $1.40 a pound.  That's a decrease of $1.60 a pound-- more than a 50% drop in the price of coffee beans to the companies making those bags of coffee that appear on grocers' shelves.  So right now, those coffee makers are seeing a healthy increase in profit for each pound of coffee they sell to us.  And don't forget the "less coffee in the bag" observation above.

Later this year when prices go up on the beans they use, we can be sure that we will see a price increase as well.  They'll be happy to tell us that the fungus has resulted in a bean shortage and an increase in prices which they must, regrettably, pass onto the customer. 

We never hear of the hefty profits they made while bean prices were down and the savings were not passed onto us.  In fact, now that they've had these increased profits you can be sure they'll never return to the 2011 profit margins because that will look like a loss to their shareholders.
Feb 20, 2013 1:48PM
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As for me I ALWAYS buy the generic brand coffee. Its cheaper by as much as 30 or even 40 percent or maybe more if your just strictly a Starbucks fan and the generic brand to me tastes just as good as any coffee I get in a restaurant. I think often times we end up just paying more just for the name.  TRY BUYING GENERIC :-)  
Feb 20, 2013 1:13PM
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I started buying from LaColombe after getting hooked on Dangerous Grounds - best coffees!! Use a french press for the best cup, forgot those millions of plastic coffee pods going in our landfills - takes a few minutes more but sooo worth it!  I will never stop buying fresh beans!
Feb 20, 2013 2:49PM
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"Coffee" Another great American ripoff..$7.00- $8.00- $9.00 a pound..Luv the stuff hate the prices. Buy 8:O'Clock coffee when its on sale for $4.99 a bag...Nothing fancy butit gets the job done..
Feb 20, 2013 2:45PM
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Wholesale coffee prices are going down. The retail side probably will not reduce their prices. I work for a small wholesale coffee roaster and we dropped our prices by 5% beginning of Feb. I doubt that the customers we sell to will be dropping their prices though.
Feb 20, 2013 1:42PM
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Coffee prices are alfull they go up almost as fast as gas, don't think walmart is any cheaper then other stores because there not, they advertise cheaper prices, thats why they raise prices every week. I'm still mad about Yuban coffee, they made there new cans a lot smaller and a higher price, do they think people won't notice most people are not stupid. I've drank this coffee for years, not now they priced me out what a shame.
Feb 20, 2013 1:08PM
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In my opinion cusumer drip coffee makers do not make a good cup of coffee. To me never hot enough. The secret is freshly ground coffee and really hot water that only a peculator (or a commercial unit) will produce. But a perculator will take longer. Also to avoid waste, make only what you need or will be drinking. Because to me reheated coffee is just no good.

Finally, around here there are places where you can buy any size cup for $1.00 at the local convience stores. The largest size is 20oz compared to Dunkin' Donuts at $2.39 for the same size. Even though Dunkin's may be better. For the $1.00 price the coffee is surprisingly pretty good.

 

Feb 20, 2013 1:13PM
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I get whole bean coffee from Coffee Bean Direct.   Excellent coffee, many choices, better than anything local and if I get 10lbs at a time..it's $7 a lb..delivered to my door.   Works for me.
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