Coffee Prices Boil Over to a 20-Year High

NEW YORK — Coffee prices on Wednesday soared to a 20-year high, prompting Starbucks Corp. and Nestle to raise prices, on speculation that Brazil’s winter could bring damaging frost to the world’s largest crop, further reducing low global stockpiles.

“Tighter supplies and increased demand for coffee has been causing the prices to continue to rise worldwide,” Starbucks said in a letter to customers posted in stores.

Starbucks said it will raise prices for drip coffee by 5 cents a cup and for espresso beverages by 10 cents a cup, effective Friday at its approximately 1,100 stores.

Starbucks also said it will raise the price of whole-bean coffee by 40 cents a pound.

The arrival of Brazil’s first cold weather of the season helped ignite this week’s 15% rally in coffee commodity prices. While frosts didn’t fall on the nation’s coffee plantations, speculation that a freeze could damage coffee trees during the coming Brazilian winter drove prices higher.

With disappointing crops already harvested by Colombia, the second-largest grower, and other producers, stockpiles in futures exchange warehouses are about half of year-ago levels.

Coffee for July delivery rocketed 21.25 cents to $2.955 a pound on the Coffee, Sugar & Cocoa Exchange in New York, the highest price since July 1977. Wednesday’s surge was the biggest one-day gain since July 11, 1994, when another frost struck Brazil’s crop.

“No one has the guts to sell in front of the Brazilian winter,” said Jeremy Woods, president of American Coffee Corp. in New York, which imports 20 million pounds of coffee a year and sells to roasters such as Philip Morris Cos., Nestle and Starbucks.

Coffee prices have almost tripled this year as smaller-than-expected crops from Latin America and Indonesia prevented a rebound in lean stockpiles that are still feeling the lingering effects of the 1994 frost in Brazil. Unexpectedly strong demand has helped fuel the surge in prices as well, traders said.

This week’s surge in futures prices prompted Starbucks to raise prices in the United States, while Nestle followed suit in Britain.

Last week, Procter & Gamble Co. and Philip Morris raised prices on their Folgers and Maxwell House brands for the fourth time this year.

* PRICE MOVES

A chart of coffee futures prices is in Investor Spotlight. D9