Speculation Perks Up Coffee Prices

Coffee market jitters that jolted futures prices up last week mean that come late winter or early spring, consumers can expect to begin paying more for a cup of java.

Coffee for March delivery reached a 23-month high of $1.82-1/2 a pound on the New York Coffee, Sugar & Cocoa Exchange on Friday before slipping to $1.79-1/2.

Both Folgers, the nation’s top seller of regular coffee, and Maxwell House announced last week that they’ll increase their list prices next month. Analysts say by summer’s end coffeehouse prices also may jump by about 5 cents a cup.

Folgers upped its price by 7 percent, which could translate to about a 15-cent increase to $2.41 on a 13-ounce can.

Maxwell House reacted to the increase in green coffee prices by boosting list prices for a 13-ounce can of regular ground coffee by 6.6 percent, and for a 13-ounce can of decaf by 3.3 percent, effective March 31.

It’s up to retailers to decide how much of that increase to pass along to their customers.

“At the shelf, I don’t think the price increases will be that painful for consumers,” said Stephen Smith, president of Coral Gables, Fla.-based South Futures, which specializes in the coffee market.

Starbucks, the trendy Seattle coffee roaster, said Friday it would sit this round of price increases out.

“Our coffee supply stretches several months into the future,” said a spokeswoman. “We’ll need to see if this rally sustains. We may need to re-evaluate prices at some point in the future.”

In recent months, coffee futures have soared 53 percent amid speculation that the all-important Brazilian harvest would be lackluster.

But Smith said a number of other factors have fueled the rally, including heavy rains and fungus problems in Colombia - the world’s second-largest coffee producer - lean U.S. coffee stockpiles, and a cold winter that has increased coffee consumption.

“A lot of the big roasters were caught short and had to get into the market to cover,” Smith said.

Despite the “spectacular” rally of the past week, “I don’t think the market can sustain these levels,” he said. “But once you get a market like this going, any little bit of information moves it. The last 10-20 percent of the move was a lot of speculation.”

Other commodity analysts said, however, they think prices could be headed even higher.

After the long holiday weekend, the Green Coffee Association will publish its latest report on U.S. coffee stockpiles after trading ends on Tuesday. The group’s latest report showed stockpiles at 1.3 million bags in December, about a month’s supply based on current U.S. consumption levels.

Also causing the market to retreat slightly late Friday was speculation that an industry estimate to be released this week will show that the Brazilian crop will be near normal.

Coffee is a closely watched commodity in Miami these days.

Although coffee has been imported through the Port of Miami for more than 20 years, the recent designation of Miami as a delivery point for green coffee destined for trading on the New York futures market has put the port on the coffee map.

There are only three other U.S. “Exchange” ports, in New York, San Francisco and New Orleans. Last year 107,481 tons of coffee, tea and spices were imported, making the category the ninth most important import commodity at the Miami port.