Price of coffee will go higher, Starbucks CEO Howard Schultz says

If the brand of coffee you drink isn't good to the last drop, you may want to find one that is. The price for a cup of joe has gone up in recent months and it'll keep getting higher, Starbucks CEO Howard Schultz said Friday during his keynote address at the National Coffee Association's annual conference in New Orleans. "The price of coffee is going to be a significant problem for our industry," he said.

Since October 5, the price of futures for Arabica beans, the South American coffee bean species that Starbucks uses, has increased over 60 percent. Just last week, futures prices hit a 14-year high, due to unusually wet weather in Colombia, which is the third largest coffee producer in the world and second-largest Arabica bean grower behind Brazil, which has also seen its crop hurt by a rainy winter. Robusta beans, which are grown in Africa and Asia, have also seen price hikes but are a generally cheaper bean anyway, selling for roughly 70 percent of what Arabica sells for.

Village Coffee, a cafe' on Freret Street Uptown that uses Arabica beans, has had to moderately increase its prices by 15 cents on small cups to $1.65 said co-owner Marty Scoggins. "We're about (to) go up a little again, and right now we're just holding on as much as we can. Hopefully it levels off," he said.

Schultz said in his address that the industry could be looking at prices hovering around three dollars per pound later this year. "Consumer demand will hurt as a result of price increases," he said. But even with the subpar growing season, the increases, Schultz said, don't reflect reality.

All of the growers he has talked to, he said, have surpluses of beans, and Schultz suggested that the prices are being kept artificially high, saying that he thinks it odd that nearly every item in the grocery store happens to be getting more expensive at the same time. "Why is the price of coffee going up when there isn't a substantive answer that can stand the test of time?" he said.

The NCA is celebrating its 100th anniversary this year. Events run through Saturday and cover topics ranging from the use of social media in the coffee industry to coffee hedging strategies.

(Source: http://www.nola.com/business/index.ssf/2011/03/price_of_coffee_will_go_higher.html)