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Drought in Brazil Forcing Wholesale Dealers to Raise Coffee Prices

January 11, 1986

CHICAGO (AP) _ Coffee roasters have raised their wholesale prices again - and with them predictions that shoppers could have to pay up to $1.50 more a pound - as the market continues to keep an eye on drought damage in Brazil, the world’s leading coffee producer.

Retail prices could go up $1.50 more for a pound of coffee in the coming months as wholesale price increases are passed along, analysts said.

No one knows for sure how far or how fast prices will rise, ″but there is no question that retail prices are going to go up,″ said Dick Ponte, a vice president for Stop & Shop Supermarket Co. in Quincy, Mass., which has 114 stores in New England.

Wholesale prices have been advancing since fall as a result of a drought that has destroyed 40 percent to 65 percent of the crop in Brazil, which produces nearly one-third of the world’s coffee.

In the latest round, General Foods Corp. raised the price of its flagship Maxwell House brand by 56 cents a pound to $3.96; Procter & Gamble added 50 cents a pound, bringing its Folgers brand to $3.95; and Chock Full O’ Nuts, instituted comparable increases but wouldn’t say how much.

The wholesalers have been following soaring prices on the futures market, where traders buy and sell contracts for future delivery, based on what they think prices will be down the road.

If analysts who watch trading on the Coffee, Sugar and Cocoa Exchange in New York are correct, prices will go higher still.

The contract for delivery in March was a little more than $2.60 a pound on Thursday, almost double what it was in September. And analyst Deirdre Macleod of Heinold Commodities in Chicago said she expects it to reach $3 soon and possibly $3.50 by mid or late February.

Ponte said his Stop & Shop stores now sell coffee bought in the past for $2.19 to $2.60.

″Based on the information we have, I wouldn’t be surprised to see $4 retail coffee eventually,″ he said. New England coffee prices, Ponte said, are usually well below other sections of the country.

Ponte said Stop & Shop has not raised prices yet because it is waiting for competitors to make the first move.

While retail prices vary across the country, Ponte said there will be a nationwide increase.

″Based on the drought and the seriousness of the damage (in Brazil),″ he said, ″we’re definitely going to see those prices″ holding at the higher level.

″Whenever there is a change in wholesale, it has to be reflected at retail,″ said Audrey McCafferty, manager of corporate news for The Kroger Co.

She said most national brands in Cincinnati, where the company is headquartered, were increased to $4.09 a pound last month to adjust for wholesale boosts of 60 to 65 cents.

Prices vary at Kroger’s 1,300 stores across the country, depending on local situations, she said, but ″when you have raises of that magnitude, they have to be reflected″ on the supermarket shelves.

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