Coffee-drinking Americans are bellyaching about rising coffee costs. Coffee’s value as a commodity is spiking due to bad growing conditions, a proliferation of coffee drinkers and speculative craze around java . A calm port in the storm could be Starbucks, which will not raise prices accordingly, in accordance with its chief executive.
Coffee costs and global warming
May Coffee futures were very high at close to $3 a pound. That is the highest in 34 years that it has reached. The International Coffee Organization reports why this is. It said that the weather along with supply and demand has caused this increase in price. Troubles are coming from Climate change. It has not been good. Recently there have been lots of issues in java producing nations. This is because the temperature and heavy rains haven't been right for the grains. A balance of temperature, rainfall and dry spells are needed to make for the best java. Warm, wet weather also incubates coffee pests, such as a fungus called coffee rust. The second larger producer of Arabica beans is Columbia after Brazil. The temperatures in Columbia in recent decades have gone up on average one to two degrees. In the last few years, rain in Columbia’s coffee regions has increased more than 25 percent.
Has the world reached peak java
Colombia produced more than 12 million 132-pound bags of java in 2006. At the time, Columbian java producers set a 2014 goal of 17 million. Last year Columbian java production totaled 9 million bags. The demand of domestic coffee has offset the coffee production increase in Brazil. Brazil’s java consumption in 2010 grew to within 3 million bags of the U.S., the world’s top coffee-drinking nation. Consumers in the developing economies of China and India are also getting hooked on coffee. The world may have already hit "peak coffee" considering the Columbia Arabica bean crop might never actually recover from this. Demand and supply won’t meet up if the world has reached peak java. In fact, coffee costs could have to rise because of this.
What Starbucks has to say
Schultz is the Starbucks CEO. He said speculators are responsible for the price increase and states the company will not have a price change. Schultz told Fox Business News that speculators are making money off rising java futures while java drinkers and java farmers suffer. He said Starbucks has already bought enough coffee to last through fiscal 2011. But Starbucks profits have been in decline. Costs just keep going up for coffee though. When it comes time to resupply the java for 2012, Shultz may have to go back on his promise.
Citations
New York Times
nytimes.com/2011/03/10/science/earth/10coffee.html?pagewanted=2&_r=1&hp
Agrimoney.com
agrimoney.com/news/precarious-dynamics-to-keep-coffee-prices-high–2910.html
Wall Street Pit
wallstreetpit.com/65589-starbucks-sbux-ceo-says-rising-commodity-prices-are-a-result-of-speculation
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