Higher Coffee Prices Brewing

A drought in Brazil has caused coffee prices to skyrocket.

Higher Coffee Prices Brewing Photo (cc) by trophygeek

Your morning cup of joe could soon put a dent in your wallet.

Coffee prices have doubled recently after a brutal drought in Brazil, which produces a third of the world’s coffee. Arabica beans, used for most global coffee production, have been hit especially hard by the dry spell, CBS News said.

According to The Wall Street Journal, Brazil’s coffee production is expected to be 18 percent less than forecast. That’s bad news for consumers.

“There is not enough coffee given current demand,” said Shawn Hackett, president of Hackett Financial Advisors, a brokerage and consulting firm in Boynton Beach, Fla. He said prices will need to rise above $3 a pound for demand to fall in line with lower supply.

So far, coffee drinkers have been sheltered from the skyrocketing bean prices. But that won’t last long.

The WSJ said you could see higher coffee prices as early as next month, unless wholesale coffee costs quickly decline.

Prices for cans and bags of coffee sold in supermarkets typically rise first, analysts say. Coffee shops can hold out longer, because the cost of beans is a smaller share of their overall costs.

Starbucks has already locked in its coffee bean prices for 2014 and 2015, so it appears to be off the hook, at least for now.

But some small roasters haven’t been as lucky, the WSJ said.

Tom Isaia, president of Plymouth, Mich.-based roaster Coffee Express Co., which roasts coffee for independent coffee shops and specialty grocery stores, said he raised prices about 20 percent this year in two separate price increases last month as wholesale prices soared. “If [futures prices are] going to stay here or rise to $2.20, that’s going to necessitate another raise,” he said.

I’m not a coffee drinker, so skyrocketing coffee prices likely won’t impact my wallet. What about you? How much are you willing to pay for your morning cup of java? Share your comments below or on our Facebook page.

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