Having to Cough Up More Dough for that Fresh Cup o’ Jo

- Dugald Malcolm, Montreal, Canada.

If you are a coffee drinker like I am, you may have noticed that you now have to dig a little deeper into your pockets to pay for that morning cup. Consumers aren’t the only ones feeling the pinch. The major retailers like Starbucks (NASDAQ:SBUX)and, Canadian favourite, Tim Horton’s (TSE:THI), are also paying coffee farmers a lot more to get a hold of their beans. The same goes for roasters like Maxwell House and Folgers, who are also being forced to pass down the high prices to the consumer, raising their prices by 25% in the last year.

According to the International Coffee Organization, since this time last year, the price per pound of Columbian mild Arabica beans has risen close to 75% and currently sits at record high prices. The same holds true for other popular Arabica and Robusta beans as farmers in Latin America have struggled with adverse weather.

The situation isn’t expected to get any better, either. Brazil, the second largest producer of Robusta beans, is delaying the harvest for the 2011-12 crops due to heavy rains last month. All this means that companies are being force to pay a lot more to farmers to secure their supply of beans.

Despite the increase in crop values, however, famers are still hesitant to expand production. Fearing that the current price trend won’t last famers are not willing to commit the added resources to plant more crops. Farmers still remember having to go many years at low bean prices up until just a few years ago. Planting new crops that takes up to four years to yield harvestable beans is just not a risk many are willing to take.

With increasing demand and a shrinking supply, the price of coffee doesn’t look like it will be coming down any time soon. If anything, it looks to be continuing its climb ever higher.

Anyone for tea?

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