Coffee Shortage Fuels Rapid Price Hike Consumers Brace For Next In A Series Of Increases Blamed On Tight Supplies

That first cup of java in the morning soon could be even more of an eye-opener: Coffee prices continue to soar with no sign of letting up as world supplies dwindle.

The price for future delivery of coffee soared to 20-year highs last week, making it all but inevitable consumers will have to pay more for a cup of joe either at home or at the local coffee shop.

For the 49 percent of Americans who drink coffee, that could change some habits. Analysts say sellers may be forced to pass on their rising costs, pushing prices up more than 25 cents a cup by year’s end.

“That would definitely get me to substitute coffee for something else, like a soft drink,” said Mark Buehlman, who normally downs two cups of coffee in the morning to “get me energized and going for the day.”

Patrick Murray, also interviewed at a Starbucks coffee shop in downtown Chicago, said he generally forks over $2 for a cup of coffee. He’ll continue to do so, he said, but “they’ll just get less change” as a tip.

Coffee prices, after falling back briefly, are once again approaching $3 a pound.

That follows a decision by the Association of Coffee Producing Countries not to ease its export quotas through June 1998 to allow more coffee onto the market. The association controls more than 70 percent of world supply and, with its decision, has virtually ensured coffee prices will remain high through next year.

The price of a 13-ounce can of Folgers, the nation’s No. 1 seller of regular coffee, has jumped nearly $1 since March. Other coffee companies have had similar increases.

“It should be noted, though, that the average price of a cup of Folgers is still less than a dime,” said spokeswoman Lisa Jester.

Prices at gourmet coffee shops such as Starbucks have increased this spring only about 5 cents a cup as the companies absorb the drop in profits.

Seattle-based Starbucks said in a statement this week it was monitoring the situation but had not decided to raise prices further.

But Michael Segal, president of the coffee brokerage and trading firm Lamborn Securities Inc., said Starbucks and other coffee houses soon may have no choice but to raise prices even with the threat consumers will drink fewer cups.

The frost season is rapidly approaching in South America and even the hint of sustained freezing temperatures is likely to send prices soaring, he said.

“Any slight problem in the next few months could push (coffee bean) prices up another dollar,” Segal said. “And the end result is that consumers are going to pay more for their coffee.”

The last time prices rose this rapidly was two years ago, driving many small coffee bars and roasters out of business when they mistimed purchases, resulting in across-the-board increases for coffee at stores and groceries.

Prices on futures markets have doubled since January, and coffee shops normally pay double that amount because of roasting and packaging costs. Futures contracts - agreements to deliver a quantity goods at a specified price at a certain time - allow farmers to transfer the risk of price fluctuations to speculators willing to gamble on making big profits.

Coffee production has fallen not only because of bad growing weather. Many coffee producers also have gotten out of the business because the price they were getting for coffee was below the cost of producing it.

A top Colombian exporter last week predicted next year’s production would be below 10 million bags for the second year in a row. Colombia’s normal production is slightly more than 13 million 132-pound bags, making it the world’s second-largest producer behind Brazil.

Graphic: Coffee prices continue to soar