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Shrinking crops in Brazil cause coffee prices to rise

Harriet Johnson Brackey

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Forget the gas pump.

The price you’ll be steaming about by summer will be what you pay for coffee.

Miami’s coffee traders and roasters expect prices to jump 50 percent – or more – because world inventories are tight and Brazil, the largest producer, is expecting a smaller-than-average crop.

That means your regular cup of Joe at the corner restaurant might jump from 90 cents now to about $1.35.

“Right now it’s pure speculation about how much, but there is no question that coffee prices have been going up,” said Jose Enrique Souto, vice president of Miami’s Rowland Coffee Roasters, which owns Cafe Bustelo and Cafe Pilon.

Local roasters who take the green beans and turn them into what consumers recognize have already seen their costs per pound go up 60 percent since September, from 75 cents then to more than $1.20 now.

“Up, up, up, to the skies,” moaned Rafael Acevedo, president of Colonial Coffee Roasters in Miami.

He raised prices to his commercial customers in mid-January and is considering doing so again soon.

Those price increases eventually trickle down to the local coffee shop or doughnut store.

Latoya Christian, night manager at a Miami Dunkin’ Donuts, said her store’s coffee prices went up just two months ago. A 16-ounce coffee went from $1.39 to $1.49 – a 7 percent increase.

The price issue began brewing last year. The price of coffee futures – financial instruments traded on a market for future delivery of commodities – jumped 60 percent, more than crude oil.

The reason: tight supplies worldwide. Demand was growing, from Starbucks Corp. and other buyers.

At the same time, crops were beginning to shrink in Brazil, Vietnam and Indonesia. Together, those countries account for 48 percent of global coffee-bean exports, Bloomberg News reported.

Today, inventories of coffee are smaller than they’ve been in 15 years, Judith Ganes-Chase, president of J. Ganes Consulting of New York, told Bloomberg.

She told an East African growers’ conference in Zambia Thursday that global coffee production may fall to between 105 and 107 million bags in the 2005-2006 season, from as much as 120 million bags in 2004-2005.

Growers, of course, are glad to see the higher prices, because the coffee market had hit historic low prices only two years ago.

“The coffee industry is concerned about the entire supply chain and the well-being of everyone in the producing world,” Joseph DeRupo of the National Coffee Association said.

About 400 members of the group are meeting this weekend in Aventura.

By summer, that $2.99 pound of Folgers at Publix would be $4.47 if the prediction of a 50 percent increase pans out.

Brazil’s production is key. Souto says its crop usually runs between 30 million and 45 million bags.

When the figure is closer to 30 million, higher prices would be expected. “Prices could be double what you see right now,” Souto said.

When consumers are faced with higher prices, will they drink?

“I think that people who are die-hard coffee drinkers will continue to drink, as I will,” said Denise Volpicello, general manager of Les Halles, a brasserie in Coral Gables, Fla. “Some of us can’t get moving without it.”

But she has no plans to raise prices on her restaurant’s $3 French press for two. That’s something she says the restaurant would consider only “if we had no choice.”

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The Independent Student Newspaper of Northern Kentucky University.
Shrinking crops in Brazil cause coffee prices to rise