Coffee addicts beware: A drought in Brazil has caused speculative stock market prices to change the wholesale cost of coffee. Something similar happened in 2010 and was, at that time, expected to last until 2012. Prior to that, there was a bad crop in 2007. Each time, prices increased as the stock market speculated on the harvest results.
The current market prices for Arabica coffee beans are climbing. The price-per-pound of coffee has gone up over 50% already this year. Folgers and other instant-coffee brands, so called “smaller roasters”, have had to raise prices to keep up with the rising costs. The larger markets, like Starbucks, are refusing to change their prices. Starbucks and Keurig have set their rates for this year while smaller companies don’t have that advantage.
The drought effects will not be fully known for another 2 or 3 months as crops have not yet been harvested, though this year’s crop yield is expected to drop 11% compared to the average. The country is rationing water in many cities so far. The overall impact of the water-loss will not only hit the coffee market, as they are seeing shortages in crops such as sugar cane as well. Adding to the cost jump is the increased number of coffee drinkers world-wide, which only drives the demand higher as buyers and coffee-drinkers alike fear an international coffee shortage.