Folgers Raises Coffee Prices as Bean Costs Soar

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Leading U.S. coffee brand Folgers has increased its list ground coffee price by 12 percent due to rising bean prices on the futures market, a company spokeswoman said Friday.

Folgers, a brand of Procter & Gamble Co. (PG) and considered an industry trendsetter, will have a new list price for ground coffee of $2.56 per 11.5- to 13-ounce equivalent can, up 28 cents.

"This is because the New York "C" contract has increased over the past 20 days to an average of $1.23 a pound from 95 cents," said company spokeswoman Susanne Dusing,

On Dec. 9, 2004, Folgers boosted its retail prices on ground coffee by 14 percent, affecting about 75 percent of its retail coffee line.

That move prompted similar price increases just days later from other major roasters like Kraft Foods Inc. (KFT) for its Maxwell House brand and Sara Lee Corp (SLE) for its Chock full o'Nuts brand.

Since then, the high-quality washed arabica beans trading at the New York Board of Trade (search) have climbed almost 40 percent.

Indeed, prices have been hovering at levels not seen in more than five years, before the coffee market plunged into a four-year crisis with oversupply and low prices, forcing thousands of farmers in developing countries out of work.

The rise in the futures market has been largely fueled by industry expectations of a global supply deficit this year.

The International Coffee Organization (search) expects world consumption of between 114 million and 115 million 60-kilogram bags, which would exceed projected output by 7 million to 8 million bags.

On Thursday, the New York Board of Trade's benchmark arabica contract for May delivery settled at $1.38 a lb. In stark contrast, benchmark coffee contracts traded between 40 cents and 60 cents a lb from May 2001 to September 2002.

"We've had a very large run-up in wholesale prices and that is always going to be passed on to the retail customer," said James Cordier, president of Liberty Trading Group, a commodities brokerage.

"Folgers is usually the leader and we will see the other brands follow the lead either today or Monday," he predicted.

Spokesmen for Kraft and Sara Lee were not immediately available for comment.

"Every roaster that we deal with, big and small, was waiting for someone to take the first step to lift prices," said Ray Keen, a coffee trader at Balzac Brothers & Co. Inc., a green coffee importer.

Green or unroasted coffee, which comes in many varieties from high-quality arabica to robusta. A roaster buys the green beans, roasts them, then packages the coffee as ground or whole bean in tin cans or plastic containers or foil packets.

"Once that did happen, there were quite a few happy roasters this morning. And now they are all looking for the next raise," Keen added.

Judy Ganes, a commodities analyst with J Ganes Consulting, agreed. "It's only to be expected. The market has come up significantly from the last time they raised prices. I'm actually surprised it took as long as it did."