Monday, April 4, 2011

Here Come the Increases in Coffee Prices

Price inflation is about to hit from every angle. Since the financial crisis, Bernanke has printed too much money for it not to have a major impact. All indications are that it will hit hard in the second half of this year.

The only persons who appear not to be  concerned about price inflation are NYT columnist Paul Krugman and his former Princeton colleague, Ben Bernanke, and other members of the Fed.

But keep in mind, just a few months ago Krugman wrote this:
There’s really nothing here to shake my view that deflation, not inflation, is the threat.
Bernanke, who famously said the subprime crisis is no big deal, has been in lock step with Krugman in his lack of concern about price inflation. This is really scary since Bernanke is the captain of the money printing boat, known as the Federal Reserve.

And New York Fed president William Dudley doesn't think there is an inflation problem because as he put it: "Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful. You have to look at the prices of all things." A member of the audience quite correctly shouted to Dudley, ""You can't eat an iPad."

Anyway, here's something more to contemplate while you drink your morning coffee. SFC, again, this time on coffee prices:

If it hasn't already, your local coffee shop is probably about to raise the cost of your morning latte.

Global coffee prices have doubled over the past year, recently reaching a 14-year high and leading national companies like Starbucks to increase prices in recent weeks. Peet's and some smaller Bay Area specialty coffee roasters raised prices in the fall, while others are just now announcing increases. And it doesn't look as if it will stop there...
Coffee prices generally fluctuate with the C market, a global commodity futures market that establishes benchmark prices for green arabica beans, the highest-grade coffee. Last spring.


  1. A childhood friend has been a coffee importer and roaster for ten years. His insights from that commodity over the last decade have led him to dig a well, raise chickens, cultivate a large garden... and get out of the coffee business... he saw wider implications from his ground-level experience and acted on it...

  2. As I understand it, coffee growers have been getting only a small pittance of the money paid for beans by the roasters. If the coffee growers were smart, they'd be using the inflationary environment as a license to jack up their prices continuously relative to other commodities and let the middlemen eat the increases when roasters and coffeeshops howl in protest.