Economics Commentary on "Price of coffee heats up".

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Rawand Helmi                                                                                

Mrs. Winnard

8th of January 2012

Syllabus Section: 2.1

Price of coffee heats up


August26, 2011 6:47 PM

Price of coffee heats up



Well over 2 billion cups of coffee are sipped or slurped every day, in every corner of the world. The cost of that coffee is rising fast.

In Tuesday's trading, raw beans averaged nearly $3 per pound, just pennies below the peak price in 1977. CBS News correspondent Bill Whitaker reports that change is bitter news for coffee lovers and retailers.

At City Bean Coffee in Los Angeles, Arabica beans are roasting, but the price of the beans is sizzling. City Bean pays more than $4 per pound.

"Our price has nearly doubled in the last 10 months. We've seen an increase to us of over $2 a pound," said Sol Salzer, president of City Bean Coffee.

All coffee beans are up in price -- way up, actually -- across the board. In 2000, popular Colombian mild cost $1.03 per pound. Over the next 10 years the price rose more than a dollar. In just the last year, it jumped almost a dollar more.

With prices rising relentlessly, as much as 10 cents per day in some instances, Salzer said he was getting burned, losing money every month. He said he had no choice but to pass some of those higher prices on to his customers.

Big coffee sellers are raising prices too. Folgers and Dunkin' Donuts raised the price of packaged coffee by 10 percent to $7 per pound. At the biggest of them all, Starbucks, packaged coffee is up some 12 percent, boosting a 12-ounce package from $8.99 to $9.99.

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This has led some customers to say they will start drinking less coffee than they used to. Some restaurant owners are trying desperately to avoid passing the cost on to customers, often at a price for their employees.

"My staff is unfortunately feeling the pinch, because I'm cutting back on their hours and I'm working more hours myself to make up the profitability," said restaurant owner Brad Kent.

There are many reasons for the price hike for coffee: Wet weather damaged crops in Columbia and Indonesia; booming economies mean millions of Indians, Chinese and Brazilians now enjoy the coffee ...

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