Starbucks to pause purchases as coffee prices rise

It seems even Starbucks are not immune from the spiralling coffee prices out of Brazil.

The worst drought that Brazil has been subject to in the past half century has left coffee prices rising and rising. Just last week downgraded output predictions from Volcafe, a global merchant, sent the cost of a bag of coffee shooting upwards, stabilising at $2.08 per lb which represented a 6% increase. In some cases, coffee verged on approaching $2.15 per lb, the highest price in more than two years.

That news has seen Starbucks, the largest coffee company in the world, take a coffee break and hold back purchases.

Prolonged dry spells in the South American country has severely impacted coffee crops and whilst everybody is guessing at just badly the world’s largest coffee producer has been affected, the truth is that “no one really knows,” mused Craig Russell, Starbucks’ head of coffee speaking to The Wall Street Journal late last week.

Growers in Brazil have only recently started harvesting their coffee crop, so it is too early, Russell states, to accurately determine the damage the dry weather has done.

Even though the Seattle-based chain recorded profits for the second financial quarter of $427m, the company is holding back from buying further coffee, instead opting to rely on current, fixed price agreements, before venturing back into the market. It is expected that the company will look to Colombia to source beans but if current price levels don’t fall, or indeed if they continue to be upwardly mobile, Starbucks may think again: “Eventually, you have to buy coffee,” Mr Russell said.

The big question that consumers are pondering though is whether this shortfall in Brazil – predicted to be around 10% according to the Brazilian National Coffee Council, but other sources have released figures in the region of 18% – will see the price of a cup of coffee increase in shops.

At least not in Starbucks as a spokeswoman has said that the company do not have any plans, at the moment, to raise its prices.

But if the current trend continues, who knows that will happen a few months further down the line.

photo: wikicommons