Coffee Prices Perk Up Shrinking U.S. Reserves Blamed For Price Spurt

Coffee drinkers could be socked with higher prices after a recent rally in the futures market shook the roasting industry.

Coffee futures rose about 15 percent during the past two weeks on New York’s Coffee, Sugar & Cocoa Exchange on concern that U.S. reserves, already low, could drop further because of reduced imports from South America. Prices for bags of coffee normally rise and fall with the futures market.

Since consumers drink the most coffee during the winter months, the strain on stockpiles is greatest now, analysts said.

“When you’re in a business that relies so heavily on a commodity and you have that sudden increase in value, you have to cover anticipated costs for the product down the line,” said Don Schoenholt, CEO of Grillies Coffee Co. in New York, a roaster that distributes specialty coffee to stores and restaurants.

Roasters probably will raise the price of coffee in supermarkets by about 25 cents a can, he said. The companies may make an announcement about a price rise within the next week, he said, though the higher price won’t be instituted until about March, when the companies take delivery of the coffee they bought on the futures market.

The roasters will tell supermarkets that they should be anticipating increases, Schoenholt said. The grocers can then “let their consumers know that the increase is coming.”

To be sure, some specialty roasters that buy their coffee directly from producers and through brokers may not raise prices yet.

Starbucks Corp. does not buy coffee sold on the futures exchange because they prefer “higher quality” coffees that come directly from producers and through brokers, said Anne McGonigle, vice president of finance and planning at Starbucks in Seattle.

Still, if futures prices rise beyond an “acceptable range,” Starbucks would probably raise its prices, McGonigle said.

“Prices typically are tied to futures,” McGonigle said. “We’re not at risk of short-term price fluctuations, but if coffee prices skyrocketed out of normal ranges, there would be a real change in supply,” and the company would raise prices. She wouldn’t say how high futures would have to go for Starbucks to raise prices. Larger roasters, such as Procter & Gamble Co.’s Folger’s and Philip Morris Cos.’ Maxwell House, would be most likely to raise prices this coming week, Schoenholt said. The roasters haven’t announced that they’ll raise coffee prices, and none responded to telephone requests for comment.

Coffee for March delivery on the Coffee, Sugar & Cocoa Exchange rose 4.75 cents to $1.4005 a pound Thursday.