Coffee prices soar to 13 year high

September 8, 2010

According to ABC News, on Sept. 7 coffee bean prices spiked to a 13-year high to $1.90 a lb. That’s a 41% hike since June. To compensate for the higher price of coffee beans, some retailers are passing the cost on to customers. The J.M. Smucker Company, which owns Folgers, raised their prices, on average, by 10% in August. So far Starbucks has kept its prices steady.

A growing demand for coffee combined with a rough growing season the past two years are to blame for the spike in prices, said Nestor Osorio, the Executive Director of the International Coffee Organization. Meanwhile, global consumption has grown at a pace of 2.5% per year. To put that into perspective, the world’s consumption of coffee has grown from 104 million bags of coffee beans in 2000 to 135 million bags this year, Osorio said.

Coffee production didn’t rise to meet the demand, resulting in a spike in prices. Bad weather in some coffee-producing countries hurt the harvest. Osorio said that rains and climate conditions reduced Colombia’s coffee bean production to 8 million bags the last two years. Typically, the country produces 11 million bags.

Now, coffee suppliers have been forced to delve into their once growing stockpiles. Some U.S. lawmakers fear that coffee producers will start stockpiling to drive prices up on purpose. On Sept. 6, U.S. Sen. Chuck Schumer of New York expressed worries that Vietnam and Brazil, the top two suppliers of coffee, will start stockpiling. Schumer noted in a letter to U.S. Trade Representative Ron Kirk that Brazil and Vietnam account for approximately 45% of average world coffee bean production and exports over the past 10 years. He expressed worries that higher prices might not come down when production rises.

“Some fluctuation in coffee prices is normal, but this high is historic and it could have staying power,” Schumer said in a press release.

The International Coffee Organization is set to meet later this month with U.S. Trade Representative Kirk.

ABC News article

Schumer press release