Spiraling Commodity Prices Include Arabica Coffee Amid Record Demand By Emerging Markets – Coffee Futures Double in One Year
United States Business Report – Global Coffee Market: Coffee drinkers appear to be unfazed by higher coffee prices. While the cost keeps going up, gourmet coffee lovers keep savoring the premium coffee and espresso without blinking an eye.
The J.M. Smucker company just raised the price of Folgers, Millstone and Dunkin’s Donuts coffee again, this time a double-digit increase. The current eleven percent price hike comes on the heels of three previous price increases of 10%, 9% and 4% in February of 2011, August of 2010, and May of 2010 respectively.
They are not alone as companies try to protect their profits in the wake of huge price increases for green coffee beans worldwide. If you are wondering why coffee prices have been going up see: Coffee Prices 2011-2012 – Coffee Price Increase – Coffee Shortage.
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Coffee Prices Have Continued An Upward Trend for More Than One Year
According to the Department of Labor a one-pound can of coffee was $3.64 a year ago and now is %5.10, which is a 40% increase. Coffee futures have also spiraled upward, nearly doubling in the last year.
Also raising prices on coffee products are virtually all of the other major coffee providers and coffee chains including Starbucks, Peet’s, Caribou Coffee and Green Mountain Coffee Roasters. Peet’s has had two recent retail price increases. Also raising prices on coffee products was Sara Lee Corp., the seller of Cafe Pilao, L’Or and Maison du Cafe.
Starbucks Price Hikes Try To Keep Up With Rising Cost of Green Coffee Beans and Other Commodities
The most recent Starbucks price hike includes an average of a 17% increase in the United States and six percent in Canada on packaged coffee. In March of 2011 Starbucks raised prices on the packaged coffee it sells in supermarkets, grocery stores and other retail outlets.
The latest Starbucks price increases will increase the price of one pound of coffee bought in its stores from the current price of $9.95-$13.95 to $11.95-$14.95.
Despite the spate of coffee price hikes consumers seem undaunted. In the United States and Europe the high demand for coffee, including gourmet coffee products and espresso-based coffee drinks like Cappuccinos and Lattes was sustained even through the years of the fiscal crisis and economic downturn.
Coffee Price Increase 2011-2012 – Coffee Prices – Coffee Shortage Due to Emerging Markets continued:
Emerging Markets With Growing Middle Classes Driving Coffee Price Increase
Meanwhile the emerging economies such as China, Brazil, India, Latin America and Russia have all seen surging growth in coffee consumption including the higher grade Arabica coffees and a range of specialty coffee products. In other words, they want the best coffee beans and they are willing to compete in price with the United States and Europe for the best coffee beans.
The upwardly mobile emerging markets have growing middle classes with more disposable income for “affordable luxuries” like premium coffee.
As demand for coffee continues to rise even amidst unprecedented price increases, coffee production has seen numerous setbacks, mostly due to inclement weather in major coffee growing regions including Brazil, Columbia and Vietnam, the world’s three top coffee growers.
There have been some bright spots, like better harvests in Ethiopia and the Ivory Coast, but this is weighed against numerous poor harvests due to excessive rains, drought, and increasing outbreaks of coffee plant diseases and pests, often due to high humidity.
The rise in coffee prices also has roots in the economic growth of China, where an upwardly mobile work force is fueling demand.
Coffee has shown to be incredibly inelastic with respect to price increases, meaning that even if the price goes up people will not quit buying it. Some consumers will attempt to find lower cost brands, but the industry also shows a very strong brand loyalty and many consumers simply pay the higher prices without questioning it.
Emerging Markets Driving Coffee Price Increase in 2011-2012 – Coffee Prices Going Up Due to Arabica Coffee Shortage continued:
Coffee Consumers Undaunted By Economic Woes Even as Coffee Shortage Leads to Rise in Increase in Coffee Prices
In 2008 when the economy was seeing some of the worst of its problems in the United States, coffee consumption still rose from 21 million bags in 2007 up to 21.7 million bags, or 2.9 billion pounds of coffee.
The rising price of coffee is just one of many commodities and household staples that has been soaring upward in price during the last year. From clothing and food to hardware, inflation has had its effect on the pocketbooks of Americans, and it is driven also by the rising price of oil which effectively increases prices on everything due to increased production and shipping costs.
America is not alone in seeing higher prices. The Food and Agriculture Organization of the UN recently announced that global food prices are at their highest in two decades in part due to grain and oil prices spiraling upward.
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