London, 11 September 2010

Coffee shops could soon be forced to increase their prices, as coffee hit a fresh 13-year high this week, while traders forecast further rises in the coming months, says The Public Ledger, a leading news, analysis and information source for the global commodities market.

Arabica futures for December delivery rose by 2.25¢, or 1.2%, to settle at $1.9455 a pound at 2pm on ICE Futures US. Earlier, the price reached $1.9865 a pound, the highest level for a most-active contract since August 1997.

A Starbucks spokesperson told The Public Ledger the company would “continue to monitor the situation closely”, but assured at least for the time being would “absorb the costs” and not increase its coffee prices.

“We don’t intend raising prices at this time because of high commodity prices, and it’s worth bearing in mind that there are many other factors which influence the retail price of our coffee including the price of labour, rent and milk,” the spokesperson said.

However, one London-based coffee broker hinted that coffee shops may soon have no choice but to increase their price for a cup of coffee.

“It feels as if the market could rally again, purely because there isn’t much in the way of selling from here to $2. It wouldn’t take much to take prices back up. I think the market wants to have a test above $2,” he told The Public Ledger. “I wouldn’t say I’m massively bullish, I just think it’s going to have a push above a big number and see what’s up there.”

However, the broker insisted nothing can be taken for granted. “A lot of people are going with the mentality of ‘the trend is my friend’ for the time being. But I’m always rather nervous when everyone’s saying it’s going up. It’s like a stack of cards, it’s being built up and then as soon as you get funds waiting to liquidate then you end up with a bloodbath and you could see prices fall to $1.85 or $1.83 very quickly.”

Coffee has surged 54% in the past year amid slumping inventories in addition to concern that too much rain would damage South American crops. As a result, coffee shops have been forced to think of new ways to save money.

Earlier this year, Starbucks launched its “Via Ready Brew” coffee series, made of instant coffee (robusta) rather than the better-quality arabica beans the company normally uses. The line was a wild success, hitting the $100m mark in its first 10 months of sales.

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