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Coffee is a costly wake-up
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March 6, 1997: 7:08 p.m. ET
Supply shortage has commodity traders bidding up prices
From Correspondent Rhonda Schaffler
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NEW YORK (CNNfn) -- There is bedlam in the trading pits of New York's Coffee, Sugar & Cocoa Exchange. Futures prices on coffee contracts are soaring due to an unprecedented supply shortage brought about by production problems and labor unrest in South America, and low inventory levels.
Futures prices have spiked from $1.25 a pound at the start of the year, to more $2.00, the highest level since 1994.
The price rise in the pits is percolating over to consumers. The makers of Folgers raised prices by 45 cents a pound, and Maxwell House is raising prices later this month.
The nation's largest coffee chain, Starbucks, has so far resisted a price hike, but the company now says it is re-evaluating its pricing.
The recent price hikes could be just the first jolt for coffee drinkers because supplies are expected to be tight through the summer.
"I think they're going to try to hold back as long as possible to pass the price increases along, but you have to realize their inventories are very lean, and that's one reason that's catapulting the markets higher," said Judith Ganes, a commodities analyst for Merrill Lynch.
While rising prices generally cause some coffee drinkers to cut back on consumption, the coffee drinkers we talked with had no plans to do without. (55K WAV) or
(55K AIFF)
One coffee drinker said while shopping, "I didn't look at the price at all. I just turned to the one I like, because I need it when I get up in the morning.."
So how high could coffee prices go? Analysts say its hard to predict, but during the last shortage, the retail price for a pound of coffee rose nearly two dollars in six months.
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