News Column

Coffee prices at Jersey Shore likely to climb because of Brazilian drought

May 7, 2014

By Anthony Panissidi, Asbury Park Press, N.J.



May 07--Coffee drinkers, either prepare to pay a higher price for your favorite beverage or start drinking another one.

In Brazil, the world's largest producer of arabica coffee beans, a severe drought threatens this year's harvest. This could lead to a significantly tighter global supply and a subsequent jump in prices, most likely around September.

In response, the futures price for one pound of coffee rapidly and unexpectedly surged, most recently to a high of roughly $2.03 at the end of April from a low of roughly $1.19 in late January, according to Agrimoney.com, which tracks the agricultural industry.

Eventually, the higher price may translate into a five- to 10-cent increase per cup of gourmet coffee, but that depends on whether large coffee chains and local coffee shops absorb the spike in expenses or pass it to consumers.

"It's (Brazil's) supply that determines, basically, the baseline that is the price for coffee for everywhere in the world," said Gregg Shefler, vice president of Coffee Bean Direct, a coffee roaster based in Frenchtown. "This drought in Brazil is kind of unprecedented ... so we really can't compare against previous droughts ... to say, 'Well, this is how much coffee is going to be harvested.' "

For the most part, consumers will not pay higher coffee prices until late this year or early next year, after many companies -- especially the larger chains -- deplete the stockpile that they bought at lower prices. On the other hand, consumers who buy coffee from smaller companies with less storage may notice an immediate hike in prices.

"They're not doing it because they're being greedy," Shefler said. "They're doing it because they really are taking a really bad hit to the coffee prices that happened extremely fast. If this had happened over the course of a year gradually, this wouldn't be as big a deal as it is."

In Monmouth and Ocean counties, a pair of small coffee chains still wrestle with how they plan to handle the increase in their costs but they say they may raise prices in a few months, depending on how high the cost of coffee goes.

"We don't have any immediate plan to raise prices as a result but it's still something we'll need to keep an eye on," said Dan Malay, who co-owns How You Brewin' Coffee Co., which operates in Barnegat Light, Stafford and Surf City. "If we can mitigate the cost, great, but if they continue to climb, ... then we'd have to adjust accordingly."

Malay last increased his prices by 10 percent two years ago, to $1.50 for a 12-ounce cup of coffee, $1.75 for a 15-ounce and $1.85 for a 20-ounce. If Malay raises prices again, he expects to do so by another 10 percent, but spread in 5 percent increments over two years.

"Typically, as long as we communicate the why behind the what, the customers have received it really well," he said. "We do our best not to surprise them in terms of just slapping it up on the menu board. Typically, we'll post a letter saying, 'We've increased and here's why.' People have really appreciated that."

A little farther north, Shawn Kingsley finds himself in a similar predicament as a co-owner of Rook Coffee Roasters, which operates four locations, one each in Little Silver and Long Branch and two in Ocean Township, with plans to open a fifth in Wall this summer.

Kingsley last raised his prices four years ago to $2.25 for a 16-ounce coffee and $2.75 for a 20-ounce. He may raise his prices by as much as 5 percent, possibly more, at the beginning of next year in response to numerous growing expenses besides coffee, including health care, milk and paper products.

"We're really trying to hold out as long as we can," he said. "We don't want price to be a decision-maker for our customers."

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(c)2014 the Asbury Park Press (Neptune, N.J.)

Visit the Asbury Park Press (Neptune, N.J.) at www.app.com

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Source: Asbury Park Press (NJ)


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