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Don't want coffee to get more expensive? Hope for rain in Brazil

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That cup of Joe is on its way to becoming a cup of Whoa.

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The leading growers of coffee beans in South and Central America are predicting poor harvests this year, with prices sure to increase.  KENT GILBERT/ASSOCIATED PRESS
KENT GILBERT/ASSOCIATED PRESS
The leading growers of coffee beans in South and Central America are predicting poor harvests this year, with prices sure to increase.

The price of arabica coffee beans has nearly doubled since November.

While larger companies such as Starbucks have locked in their price for coffee beans for this year and part of next year, smaller companies are faced with the prospect of raising prices for their coffee drinkers.

The source of the trouble affecting prices is in Brazil, which is fending off a leaf disease and a drought. And concern over the coffee crop in the South American nation is enough to affect prices because Brazil is the world’s largest coffee producer, accounting for about a third of global production, according to the International Coffee Organization.

Coffee was selling for $2.07 per pound on the New York Mer­can­tile on Thursday. Coffee bean prices hit a low around $1.10 in November and have been rapidly climbing since.

Even so, prices haven’t been as bad as three years ago. They spiked at $3 per pound in 2011 and were still between $1.50 and $2 for most of 2012.

Concern about not having enough supply to meet demand is driving up prices.

Brazil’s National Coffee Coun­cil said it expects the country’s harvest to be between 40.1 million and 43.3 million bags, down from its previous forecast of 44 million bags, according to The Wall Street Journal.

Sterling Smith, a commodities analyst at Citigroup, told the Associated Press that big price swings for coffee might become the norm in coming months.

“We’re going to be seeing this happen frequently until we get a better idea of how much damage was done to the crop,” Smith said. Coffee in Brazil isn’t harvested until June.

The Wall Street Journal also reported that the lower-grade robusta beans around the world will come in short of demand by 11 million bags.

The number of coffee bags might be shrinking, but the number of coffee drinkers is not. About 83 percent of adults in the U.S. drink coffee, reported the Na­tional Coffee Association of USA.

Overall coffee consumption jumped by 5 percent this year, according to the association’s National Coffee Drinking Trends market research study.

The association also reported Americans continue to drink more coffee than soft drinks, a gap that has widened over the last several years.

Coffee roaster John Curry, co-owner of Buona Caffe Artisan Roasted Coffee on Central Avenue in Augusta, is on the fence as to whether he will have to increase his prices or “hold off a little while longer” in response to higher coffee bean prices.

Even though Curry’s business doesn’t use the same arabica beans that are standards for the Folger’s and Maxwell House brands, the cost of specialty beans has also gone up.

“I’m afraid I might have to raise on my retail coffee, maybe not my wholesale for right now,” Curry said.

Buona Caffe is also a roasted bean supplier to shops in the Augusta area and as far away as Statesboro, Ga. The Georgia governor’s mansion is also a wholesale customer.

Curry said prices started going up on the threat of drought and kept going up as the drought became real. In Central and South America, coffee plants are suffering from leaf rust.

“Global coffee prices interact with that,” said Curry, who also buys from Africa and Asia. “I’m paying well over $4 a pound for some of my coffee.”

The top companies – Starbucks, J.M. Smucker Co., the maker of Folgers, and Kraft, which owns the Maxwell House brand – have the ability to lock in prices and stock warehouses. Curry said he doesn’t have the facilities to warehouse large amounts to avoid price spikes.

“It’s not going to affect them in the short term like it does a small roaster like me when I order 1,300 pounds of coffee. I have to order every month or so,” Curry
said.


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