Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, May 13, 1994 TAG: 9405130084
SECTION: BUSINESS PAGE: A11 EDITION: METRO
SOURCE: Associated Press
DATELINE: BOGATA, COLUMBIA LENGTH: Medium
Coffee prices are rising on international trading floors, and consumers will soon pay more - perhaps as much as 7 percent in the next two weeks - at supermarkets and coffee shops for Jamaican Blue Mountain and other varieties, experts say.
``Coffee is becoming scarce,'' said Gustavo Gaviria, the president of one of Colombia's biggest coffee exporting companies, in between sips of java in his company's boardroom.
This week in London, the world's coffee-trading center, coffee hit $1.04 a pound, the highest price since June 12, 1989.
The jump was caused in part by coffee-producing countries using tactics like OPEC, the oil cartel, to impose production ceilings and restrict supplies.
The Association of Coffee Producing Countries decided in mid-1993 that its members would retain 20 percent of their coffee crops to force up prices that plummeted after 1989, dropping as low as 40 cents a pound in 1991.
In addition, less coffee is being produced. The 1990 worldwide harvest of coffee for export was 4.64 million tons. This year, it was down to 4.16 million tons, according to industry statistics.
Production has fallen because coffee-growing became unprofitable. Colombia's verdant Andes, where coffee plantations once stretched to the horizon in some areas, became dotted with cattle ranches and poppy and coca plantations - for production of heroin and cocaine - as coffee growers turned to other crops.
Violence also has contributed to the drop. Coffee production in nations like Rwanda has been wiped out because of internal strife. Coffee planting and harvesting was disrupted in Chiapas, Mexico, by an armed Indian rebellion this year.
In Haiti, production fell from 16,800 tons in 1958 to 3,600 tons this year, largely because of violence and a U.N. embargo on the military-ruled nation.
Pests also have done damage. Colombia lost 30 percent of its coffee crop this year to a worm that burrows into the coffee bean, destroying it.
Who benefits from rising coffee prices?
Profits ``will be split three ways, among growers, traders and speculators,'' says Hercilio Amaral, secretary-general of the National Coffee Council of Brazil, the world's biggest coffee producer.
Industry experts say companies that roast the coffee bean and market it to the public, like Philip Morris Cos., also will take a big cut.
When coffee prices plunged after 1989, the roasting companies did not reduce their sticker prices.
``The roasters were making a killing,'' Gaviria said.
Now, with market prices high, the roasting companies likely will use that as a reason to boost prices consumers pay in supermarkets, according to Gaviria and an international coffee expert.
by CNB