Caffeine High: Coffee Prices Soar to 13-Year High

Sept. 7, 2010 — -- Your light latte might leave your pockets even lighter.

Coffee bean prices spiked to a thirteen year high today to $1.90 a pound. That's a 41 percent hike since June.

To compensate for the higher price of coffee beans, some retailers are charging you more for your cup of joe. The J.M. Smucker Company, which owns Folgers and Dunkin' Donuts, raised their prices, on average, by 10 percent in August.

""The J.M. Smucker Company has been committed to transparent coffee pricing that reflects the fluctuations of the global green coffee market," a spokesperson for the company said.

For now, the price hike will hit you only at grocery stores, drug stores and club stores that sell Folgers and Dunkin' Donuts coffee.

Coffee powerhouse, Starbucks, has kept its prices steady so far.

Growing Consumption of Coffee

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.

"Demand has been very dynamic despite the world economy," Osorio said. "People need to have more coffee. If they're not going out for coffee, they're fixing it at home."

Global consumption has grown at a pace of 2.5 percent 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.

The scarce coffee crop is a far cry from the period between 2000 and 2005 when coffee producing countries had a surplus of beans. Prices were low and stocks of coffee beans were piling up.

Now, coffee suppliers have been forced to delve into their once growing stockpiles. Some U.S. lawmakers fear that coffee producers will start stockpiling on purpose to drive prices up on purpose.

Chuck Schumer: "Rising Prices Could Have Staying Power"

Yesterday, U.S. Sen. Chuck Schumer of New York expressed worries that Vietnam and Brazil, the top two suppliers of coffee will start stockpiling.

"Stockpiling by the two largest producer countries would have adverse economic consequences for importing countries, as well as for consumers around the world," Schumer said.

Schumer noted in a letter to U.S. Trade Representative Ron Kirk that Brazil and Vietnam account for approximately 45 percent 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.

When asked about the stockpiling, Osorio from the International Coffee Organization said that the organization does not intervene in market-related activities and any country is free to adopt its own coffee policy.

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