Managed Funds Main Driver of Coffee Prices
By CAROLYN CUI
from WSJ (March 1, 2008; Page B1)
Get ready to spend more for your morning pick-me-up.
Coffee prices are on the march, and the costs of the milk, sugar and even paper cups also are climbing. But whereas other commodities like copper or oil have been pushed up by demand from developing countries, coffee is a different case. Demand has only edged up, and much of the recent surge is due to speculators hopping into the commodity.
Oren's Daily Roast, a boutique coffee store in New York City, has charged $2.95 for a medium latte for the past two years. Now, owner Oren Bloostein is considering a price increase of perhaps 3% for a cup of coffee and up to 10% for the coffee beans it sells.
"It is very disconcerting," said Mr. Bloostein. But after an 11% increase in ingredients since the beginning of this year, Mr. Bloostein said, "I need to raise my prices so that I can remain in business."
The price pressures on a cup of joe began building last year. The price of the coffee itself rose 7.7% last year, while milk climbed 24%. Now, spurred by tight supplies of coffee beans and investors looking for the next commodity run-up, prices are boiling over. The price of green coffee beans has risen 22% since the beginning of the year in trading on ICE Futures U.S.
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