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Coffee Prices Going Up

December 7, 1985

CHICAGO (AP) _ Coffee drinkers are likely to be paying more for their morning eye opener soon because a severe drought in Brazil may have wiped out half of the crop in the nation that produces nearly a third of the world’s coffee.

The three largest domestic coffee roasters, General Foods, Proctor & Gamble and Chock Full O’ Nuts have raised their wholesale prices for roasted ground coffee.

The increases follow a dramatic surge in prices on the Coffee, Sugar and Cocoa Exchange in New York, where coffee futures are traded.

Since Oct. 1, when talk of the drought began to stimulate buyers on the futures market, the price of coffee for delivery this month has jumped almost 50 cents a pound.

The December futures contract has increased from about 1.32 a pound to $1.80 a pound. And analysts say the rally could push prices to $2 a pound.

Deirdre Macleod, a coffee analyst in Chicago with Heinold Commodities, said prices have advanced in response to crop damage caused by a persistent drought in Brazil, which produced more than 30 million 132-pound bags of coffee last year.

Miss Macleod said most analysts believe that Brazil’s production this year will be cut in half and some believe that 70 percent of the crop will be lost.

At any rate, she said, the damage is irreparable, because it is too late in the growing season for rain to rescue the crop.

Chock Full O’ Nuts, based in New York, said Friday that it was revising a previously announced price increase of 15 cents a pound to 30 cents a pound, said Joseph Breslin, vice president for corporate affairs.

General Foods, located in White Plains, N.Y., has increased its price 31 cents a pound in three steps since Oct. 31, said Rich Collins, associate manager. General Foods produces coffee through its Maxwell House subsidiary.

Proctor & Gamble has raised the price of its Folgers coffee by 16 cents a pound, said Don Tassone, a spokesman for the Cincinnati-based company.

All three spokesman said the drought in Brazil was the cause of the price increases.

Their increases are expected to be more moderate than those of specialty shops that feature gourmet coffees, Miss Macleod said. She said mass producers can simply change their blends to include more coffee from other producers.

Laura King, manager of Something’s Brewing, a specialty coffee shop in Chicago, said the store probably will order less coffee this year to compensate for the price boosts they anticipate.

Meanwhile, the International Coffee Organization is concerned that higher prices might permanently reduce consumption and has taken steps to make more coffee beans available.

The organization, which sets quotas for the producing countries, recently said its members could sell 35 percent of their annual quotas during the first quarter of the marketing year if they agreed to make a corresponding reduction in the third and fourth quarters.

Miss Macleod said the cartel tries to keep prices down because coffee drinkers who quit rarely come back.

For instance, said Bill Brooks, director of public relations for the National Coffee Association in New York, a severe drought in Brazil in 1975 killed many trees and led to an increase in average coffee prices to $2.85 a pound from $2.01 a pound.

In the following two years, the percentage of Americans who drink coffee fell from 61.6 percent to 56.7 percent. This year, the percentage is about 55 percent, Brooks said.

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Here are some price trends in major commodity markets this past week:

Coffee for delivery in December settled Friday at 180.37 cents a pound, up from 165.25 cents the previous Friday.

Wheat, oats and soybeans were higher and corn was lower on the Chicago Board of Trade.

Wheat for delivery in December settled Friday at $3.44 a bushel, up from $3.343/4 the previous Friday; December corn slid to $2.43 a bushel from $2.44; December oats climbed to $1.291/4 a bushel from $1.201/2 ; and January soybeans advanced to $5.071/2 a bushel from $4.99.

Cattle and frozen pork bellies were lower and hogs were higher on the Chicago Mercantile Exchange.

Live cattle for delivery in December settled Friday at 65.92 cents a pound, down from 68.87 cents the previous Friday; January feeder cattle slid to 65.27 cents a pound from 67.60 cents; December live hogs advanced to 49.45 cents a pound from 48.95 cents; and February frozen pork bellies slipped to 64.25 cents a pound from 65.10 cents.

Precious metals were slightly lower and copper was higher on the Commodity Exchange in New York.

Gold for delivery in December settled Friday at $322.30 a troy ounce, down from $322.90 a week earlier; December silver settled Friday at $6.029 a troy ounce, down from $6.077; and December copper advanced to 64.20 cents a pound from 61.20 cents.

Petroleum futures were mixed on the New York Mercantile Exchange, which was closed Nov. 29.

Crude oil for delivery in January settled Friday at $28.74 a barrel, up from $28.64 on Nov. 27; heating oil slipped to 83.13 cents a gallon from 84.10 cents Nov. 27.

End Adv Weekend Editions Dec. 7-8