Blame it on Brazil.
A drought there is causing a spike in coffee prices.
In the past couple of weeks, the cost has increased more than 55 percent in what is known as Coffee C Futures, according to Bradford Bason, owner of Bason’s Coffee Roasting in the Danville area.
“It’s all about supplies. Brazil supplies about one-third of the world’s coffee and they are going through a drought now. They project coffee production will be down this year and that’s what’s driving up prices,” he said Thursday.
Andrew Oakes, owner of Fresh Roasted Coffee in Selinsgrove, agreed prices have gone up quite a bit the past week.
At the end of 2013, the cost of raw Arabica coffee, the most popular, was $1.06 a pound, Bason said. The price increased to $1.16 a pound in January and was listed at $1.75 a pound Thursday afternoon.
When Bason’s broker told him Wednesday the cost had gone up more than 50 cents per pound, “My jaw dropped. I saw a spike in the Coffee C but I didn’t realize it was going up that fast,” he said.
Oakes hopes the increase will be a short-term problem. “While the drought in Brazil is the biggest part of the problem, it’s not for lack of coffee. There is a substantial amount of coffee and a backlog. It’s like any other commodity. Speculation drives the price up,” he said.
Fortunately, he said, he bought most of his coffee ahead to hedge his position.
“That is going to help us carry through some of that,” he said.
Bason said the questions are how high the price of coffee will rise and how long the prices will stay up. “Nobody knows. My speculation is that retail won’t see any changes in the near future. Myself and other roasters tried to buy in while the price was low and stock up,” he said.
If the prices remain high for a length of time, he expects to see increases in the cost of coffee at grocery stores and coffee shops.
He said he didn’t expect any changes with his retail pricing at this point.
The upside to this is farmers are seeing more money in their pockets, Bason said. “In other parts of the world where the commodity is tied to the C, their price has risen,” he said. From a report he read from Nicaragua, a farmer was very pleased and starting to make a low profit.
“There is a lot of coffee in the United States that has already been bought,” Oakes said.
His business sells to all sizes of companies from Alaska to Hawaii. He also sells to businesses in the Valley including natural food stores.
“We have a state-of-the art coffee roaster that is one of the most advanced in the world in Selinsgrove. It is environmentally friendly and almost totally smokeless,” he said.
Bason, who sells to restaurants, coffee shops and churches in Pennsylvania, New Jersey and Maryland, has been doing more business in Tennessee and Indiana.
He is venturing into wholesale selling in the single serve arena with BC-Kups. He said they are unique since they are completely recyclable. Their first sales will be of the Ironmen blend. “We have some samples and have made some sales with our first batch coming in a week or so,” he said. Bason is also exploring adding coffee chocolates.
This spring, he plans to move to a new facility with a retail outlet in the Danville area.
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Blame it on Brazil.
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