Coffee Prices Going Up 2011 and 2012

by Dan Harrington on April 2, 2011

Coffee Price Increases Amid Rising Demand By Emerging Markets, Disappointing Coffee Harvests and Speculative Investing in Coffee Futures Markets

World Coffee Market Report: With the skyrocketing price of green coffee beans (unroasted coffee beans) on world markets during the nine months, it was inevitable that consumers would eventually feel the pinch of higher coffee prices.

Top coffee chains and coffee roasters across the board have engaged in a series of price increases that likely are not over.

Major Coffee Companies Raising Prices On Coffee Products

Starbucks, Green Mountain Coffee Roasters, Peet’s, J.M. Smucker Company (Dunkin’ Donuts, Folgers and Millstone), Kraft (Yuban and Maxwell House coffees), Caribou Coffee, Sara Lee Corp., McDonald’s and Nestle have all announced price increases.

Wholesale coffee prices a have nearly doubled in the last twelve months and approaching the highs of 1977, and consumers are now paying more for their packaged coffees as well as for Espresso-based Specialty Coffee Drinks including Cappuccinos, Lattes and other fine coffee beverages.

Disappointing Coffee Harvests Causing Arabica Coffee Bean Shortage – Coffee Prices Going Up!

Colombia has endured three straight years of lower than average coffee harvests causing a steep rise in the country’s coffee prices.

In addition to the inclement weather that has affected the crops and disrupted shipping due to infrastructure damage, Colombia’s coffee crop has also been inordinately affected by coffee plant diseases and pests including coffee leaf rust which is exacerbated by the higher humidity.

Lower production in powerhouse grower Brazil has caused strong upward pressure on coffee prices along with lower harvests in Vietnam, Mexico, India, Costa Rica, Guatemala, Uganda, Panama and Kenya.

Coffee Prices Going Up 2011 and 2012 continued:

Continued concern over supply disruptions have most industry analysts predicting high coffee prices at least through 2012 even if major growers begin to produce bumper crops, which is far from a certainty. The coffee shortage and higher prices are being driven by a distinct shortage of the higher quality Arabica coffee beans.

The average temperature in Coffee Growing Regions has increased one half of one degree in the last 25 years, according to the International Coffee Organization, and this is driving Arabica coffee farmers to higher elevations where the plants thrive in the cooler temperatures.

2011 and 2012 Coffee Prices Going Up – Arabica Coffee Price Rise continued:

Broad Range of Commodities Rising in Price – Coffee Prices Rising

Along with coffee a whole range of other commodities has also been spiraling up in price to to weather problems including cotton, sugar, wheat, rice and various other crops from lettuce to tomatoes.

Meanwhile the demand for commodities including coffee is rising rapidly in emerging markets such as China, Brazil, India and Latin America. Worldwide demand for coffee is rising about two percent annually, but the rates of growth in emerging economies is growing typically three to five times as quickly.

Developing nations with growing middle classes are now willing to compete for the best coffee beans. Brazil will exceed U.S. coffee consumption next year and by 2015 will need to keep half of all of its own coffee crop just to satisfy its own coffee needs.

Investors Drive Up Coffee Prices On Futures Markets – Infusion of Money From Hedge Funds Due To Easy Money Credit Policies

Speculative trading by investors has driven up coffee futures prices in the last year and many industry analysts have blamed this for exacerbating the coffee shortage.

Huge amounts of money have flowed into commodities markets from hedge funds and many industry analysts and coffee company CEOs have lamented the run-up in coffee prices due to speculative investing.

Economists say this is due to the low interest rates being maintained by the U.S. Federal Reserve and other governments with “easy money” credit policies fueling the flow into commodity markets exacerbating the price increases.

Meanwhile oil prices continue to rise with the effect of causing prices of all goods to rise due to increased shipping and production costs. Unrest in North Africa and the Middle East creates further uncertainty in world markets adding to a broad range of commodity price increases including coffee.

Worldwide Coffee Supply Being Outpaced By Demand

Worldwide coffee production in 2011-2012 is predicted to be about 131 million 60-kg bags while demand will be about 135 million bags.

In China it is said that many people have taken up coffee drinking in part to emulate Europeans and Americans, and coffee drinking is increasing in the country by an estimated twenty percent annually with Starbucks planning one thousand new stores.

Starbucks also recently came to an agreement with a major company in India to begin opening cafes in that country where coffee consumption is also growing rapidly due to rising middle class with an increasing amount of disposable income.

Thanks for Reading Coffee Prices Going Up 2011 and 2012 in the Gourmet Coffee Lovers!

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