Coffee faces a 40% price jump

Some prized growing regions of Brazil could be hit with cold weather from the South Pole.

By Kim Peterson Apr 29, 2011 6:59AM
Image: Coffee (© HD Connelly/Getty Images/Getty Images)The prices of Folgers and Maxwell House coffees have already been creeping up, but now the companies face a possible 40% spike in bean costs as Brazil deals with hail and possible frost, Bloomberg reports.

The industry has seen Brazilian frost wreak havoc on prices before. In 1994, a frost damaged coffee crops and prices rose 39%. If the same thing happens this year, coffee could hit a record $4.20 a pound, according to Bloomberg. And if coffee is that high at the wholesale level, just imagine what it will cost on store shelves.

As if that weren't bad enough, there's already a shortage this year of Arabica beans, causing prices to increase 24%. "If Brazil has a frost, not only will we see uncharted prices but the situation might become unbearable," industry analyst Rodrigo Costa told Bloomberg.

Kraft Foods (KFT) hiked the price of Maxwell House and Yuban by 22% last month. JM Smucker (SJM) upped prices for Folgers by 10% in February.

For now, the industry is watching the weather in Brazil intently, particularly the Center South region that produces the Arabica beans favored by Starbucks (SBUX) and other brewers. Cold weather from the South Pole is due in that region next month, Bloomberg reports, and the temperature is expected to fall to 41 degrees. Coffee trees are in danger below 34 degrees.

Starbucks chief executive Howard Schultz is confident his company will have no coffee supply problem. Coffee suppliers say everything is fine, he told CNBC. The problem is that hedge funds and other speculators are pushing prices sky high.

"So we're living at a time right now where financial speculation index funds, hedge funds have created a rush of very, very high prices," Schultz said. "And not only coffee, corn, sugar, cotton and obviously oil, and unfortunately it has to hit the consumer."

Schultz added that he doesn't see much elasticity on coffee pricing. With the economic downturn, he said, the industry must be very conscious about prices.

Starbucks reported a 20% increase in quarterly profit Wednesday to $261.6 million, or 34 cents a share, meeting analyst expectations. Revenue rose 10% to $2.8 billion, which exceeded analyst expectations.

23Comments
Apr 29, 2011 8:28AM
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If they have a frost? Well, if they have a flood, it will wash the beans from the trees and we won't have any coffee at all. If they have a fire, it will destroy the coffee also. If they have a mudslide, the beans will be gone also. We can if this all day. Nothing like that word IF!!
Apr 29, 2011 9:55AM
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No problem.  I drink at least a pot a day, but it is already ridiculously too high.  They can keep it until the price goes down.  I drink too much of it anyway and this would be a good time to quit.  It's just like oil prices.  It is all controlled and they set it at whatever they want.  Case in point, during the oil spill last year they cut off oil in the gulf, but prices were the cheapest they had been in years.  Why?   To suck up to the public and counter the bad publicity.  Now that he oil is flowing again, it's time to screw the public and jack the price up.  Remember back in the fall, before the prices started to skyrocket, they predicted these high prices.  How?  Because they already knew what they were going to do.  Same with Coffee.  The prices are set at what the market will bear.  We Americans are so spoiled and stupid that we will "bear" anything.  It's out own fault.  Time to step up and say, 'NO!"

 

Apr 29, 2011 10:06AM
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So a 40% increase because there "could" be a frost? Ok so what "if" a meteor fell out of the sky on Friday the 13th...50% increase?
Apr 29, 2011 8:52AM
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So back in 1994 did we see the price of coffee go down after the so called tragedy. Is this a temporary price hike. Don't think so!! You get used to a price and we just keep buying/It is happening with everything and we are helpless to do anything about it.
Apr 29, 2011 8:49AM
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If TP gets higher, there's always the Sears catalog...wait...Sears hasn't had a catalog out since the 1990's.  Maybe wipe your @$$ with the advertising circulars from the Sunday paper...as well as the Sunday paper itself.  Perhaps the Sears ad will make a good substitute for the Sears catalog.  But then again, you'd need an outhouse, since that type of paper will plug up the toilet, resulting in a big plumbing bill.
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I merely like coffee, I do not require it.  I guarantee, should the price of coffee jump 40%, that demand will drop.  At least by the amount that I drink. 
Apr 29, 2011 9:16AM
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Am i to assume theres been a `frost` since 1994?? gimme a break, their pullin the same cra* as everyone else. i`m jus waitin for the day when it cost me 5.00 a pop, to wipe my ****!!
Apr 29, 2011 9:54AM
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An internet report says that coffee prices will rise because of such and such a reason. This will cause people to panic and all will rush to buy more coffee or coffee stocks which will in turn raise demand and forecast and will raise the price even more. Isn't it funny how the market works?
Apr 29, 2011 8:40AM
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Coffee to 'Toilet Paper', that's quite a leap there laus deo!!!!
Apr 29, 2011 8:46AM
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Easy answer...switch to tea bags.  Also, put Postum back on the market.
Apr 29, 2011 10:38AM
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Simple solution....import coffee from Colombia.  Like other have said, you can get the coffee for pennies on the dollar and the supply there over shadows the demand.. REALLY...IF Brazil was our sole coffee supplier, I could understand and accept a price increase.  HOWEVER, with company profits continuing to rise, and a plethora of supplier, why the hike in price?  Maybe to stick it to the American middle class??
Apr 29, 2011 9:34AM
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lets see, not only do i have to grow my own tobacco, make my own beer. Would anyone be able to tell me what it takes to grow a coffee bean plant??
Apr 29, 2011 9:34AM
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What's with the sudden jump to talking about toilet paper?  Weird.

 

Anyway, there is something you can do about it -- don't buy it.  Lack of demand will bring the price down.  I feel for restaurant owners though.  They have to offer coffee, especially with breakfast.

Apr 29, 2011 9:34AM
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Might as well raise the price of coffee. Sure don't want to be left out as everything else is going up. The only freeze is the ice in the drinks of the ones just wanting more money.
Apr 29, 2011 1:40PM
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Shop at Aldi.  All their prices are going down.
May 25, 2011 9:58PM
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Use a home coffee roaster!  You will save a bundle on coffee beans and home roasted coffee tastes much better.
Apr 29, 2011 8:30AM
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Friends, when "Toilet Paper" increases by 40% I will **** on the White House floor.
Apr 29, 2011 9:12AM
Apr 29, 2011 1:46PM
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If we don't buy it , that is the if they should be thinking about!
Apr 29, 2011 10:06AM
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Ok......here it is in a nutshell, they pay pennies for the beans! They don't pay the folks growing or picking very much and they don't care. So that sums it up.....it's always about the money and I don't have to tell you that we all know it. It's such a shame that these folks who bust there butt for coffee don't reap the rewards, so maybe someone should tell them to raise there prices on the buyers and see if they like it?
And I saw a comment on can you grow a bean plant in the states....well yes but you need to research it first and follow close details to what they tell you. Enjoy

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