Coffee lovers can expect to pay more for daily cup

June 30, 1994|By Jay Hancock | Jay Hancock,Sun Staff Writer

Waking up is about to get more expensive.

Coffee prices are rising, pushed by supply shortages, a cold South American winter and financial speculators.

The cost of raw beans has staged its most spectacular increase in years, more than doubling in two months and leaping by 48 percent since a surprise freeze in Brazil over the weekend. Higher prices at the supermarket shelf and cafe spigot are next, retailers and analysts said.

Giant Food Inc., Baltimore's biggest supermarket operator, said its customers should expect coffee-price boosts of 12 percent to 16 percent in the next few weeks. Store prices will rise even more if beans stay as costly as they are now, coffee analysts said.

"This is probably the highest coffee has been since 1986," said Nicholas Constantinides, president of Eagle Coffee Co. Inc., a Baltimore wholesaler and roaster. "When you get a price increase like this, there's no way you can hold back" on passing it to customers, he said.

Local grocers reported that they have from a week's to a #F month's coffee supply in hand. Giant and Metro/Basics Food Markets promised not to raise prices until present stocks run out and costlier beans and grounds go on the shelves.

Shoppers are hoarding already.

"Instead of buying one can of coffee, people are buying five times as much," said John Ryder, president of Metro/Basics. "You get yourself into what I call panic buying."

Price tags may change more quickly at cafes and bean boutiques that don't have big inventories.

"I'm trying to eat up the difference for a few weeks, while I can," said Peter Nobel, proprietor of the Coffee Cafe in Baltimore. "I hope coffee prices will stabilize, because otherwise we will have a problem."

Prices have been stimulated by a brew of factors more potent than the strongest Arabica.

Worldwide supplies have been shrinking for several years, as unusually low bean prices discouraged production. U.S. imports of raw coffee fell by more than 10 percent last year, reported the National Coffee Association of the USA.

Diminishing stocks started affecting prices in May, and big U.S. coffeemakers such as Folgers and Maxwell House had already announced one price increase about 10 days ago.

Then, over last weekend, bean prices started acting like a pogo clown on a caffeine jag.

An Antarctic cold snap destroyed as much as one-third of next year's coffee crop in Brazil, the world's biggest producer.

In response, commodities traders have bid raw coffee beans up by more than 60 cents a pound this week. Beans for September delivery rose to almost $1.90 per pound yesterday on the New York Coffee, Cocoa and Sugar Exchange, up 16.9 cents on the day and an eight-year high.

In early May, beans cost only a little more than 80 cents per pound.

Speculators helped supercharge the trading, driving prices perhaps beyond what's justified by supply and demand, one analyst said.

"This coffee rally has gotten so much media attention," said Judith Ganes, a coffee analyst for Merrill Lynch in New York. "Every doctor in Dubuque knows what coffee prices are. Everybody knows how well Hillary Clinton did trading in commodities."

The fact that neophytes are buying coffee futures suggests that prices are being driven by uninformed greed as much as market fundamentals and could fall as rapidly as they have risen, Ms. Ganes said.

Even so, Folgers and Maxwell House, the nation's No. 1 and No. 2 brands, yesterday announced their second price increases this month.

Last October, Folgers was charging wholesalers $1.89 for a 13-oz. can of ground coffee. Now the price is $2.74, up 40 cents from just two weeks ago, parent company Procter & Gamble said.

Retail shoppers will pay more, but it's unclear exactly how much. Grocers' coffee prices vary widely, with some cutting prices to lure customers and others making a hefty profit on each can.

zTC Several local supermarkets contacted yesterday reported prices for a 13-oz. can of Folgers ranging from $2.99 to $3.99.

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