MARY LOUISE KELLY, host:
Now, an important question with a potentially expensive answer: Did you start today with a cup of coffee? If so, you're in good company. More than half of all American adults drink coffee on a daily basis. Now, here's the expensive part. Prices for green coffee - that's the unroasted beans - have soared more than 50 percent over the past year.
WNYC's Charlie Herman has that story.
CHARLIE HERMAN: There was a time when coffee was a much simpler affair -but not anymore.
Unidentified Male #1: Hi. Can I get an El Salvador, please? Small.
HERMAN: Now you can order coffee from specific countries. Here at Cafe Grumpy, a specialty coffee bar in Manhattan's Chelsea neighborhood, they serve high-quality coffee at prices ranging from $2 to $8. Caroline Bell is the co-owner.
Ms. CAROLINE BELL (Co-owner, Cafe Grumpy): I dont think they are afraid to spend their money if they know they are getting something that's worthwhile or good or sustainable.
HERMAN: You might think, at these prices, the coffee business is a lucrative one, but with high labor costs and steep rent and now prices for raw beans at 13-year highs, profits can be slim.
Mr. DONALD SCHOENHOLT (Owner, Gillies Coffee Company): Coffee will scorch if it's roasted standing still.
HERMAN: Donald Schoenholt knows this. He owns Gillies Coffee Company, a specialty wholesale roaster in Brooklyn founded in 1840.
Mr. SCHOENHOLT: We are now standing in the room where we store our green coffee.
HERMAN: The beans are piled high in burlap sacks stamped with the names of faraway locations: Guatemala, Indonesia. This day, Schoenholt is roasting beans from Honduras, 600 pounds at a time.
Mr. SCHOENHOLT: It's kind of like making a toasted marshmallow over a campfire. It takes a few minutes to get that marshmallow to turn from white to tan, and then if you blink, it catches fire and falls into the fire
HERMAN: With nearly 50 years in the business, Schoenholt has seen prices rise and fall before. But now there's a fundamental shift in the market. Brazil, the world's largest coffee grower, is soon expected to consume more coffee than the United States.
And then there are new coffee drinkers in India and China. Those nation's expanding economies have already pushed up prices for raw materials like corn and cotton. Now, its coffee.
Mr. SCHOENHOLT: As China becomes more and more middle class, they want to emulate the European and American ways, and that means drinking coffee.
HERMAN: More coffee drinkers puts more pressure on prices at a time when coffee supplies, especially of higher-grade Arabica beans, are shrinking.
Mr. SCHOENHOLT: In Colombia, Costa Rica, Guatemala and several other coffee-producing nations, there have been smaller crops coming out of these countries.
HERMAN: Bad weather is one reason. But even when you look back over the last several years, overall coffee production hasnt increased that much. And simply planting more coffee trees wont lower prices today because it can take up to five years before they start producing beans.
The soaring prices of coffee have also attracted the attention of investors and speculators betting on higher prices. Schoenholt tracks prices at the ICE, the Intercontinental Exchange, where coffee futures are bought and sold.
Mr. SCHOENHOLT: There is so much money now in coffee that I have to look at it and believe this is not coffee roasters that are pushing the price up because of their customers needs but rather money coming in from money funds that is jigging the price up.
HERMAN: Already, major brands like Maxwell House and Folgers have increased prices. Starbucks says it will charge more for certain coffee drinks. Schoenholt expects he will have to raise his prices, so too does Caroline Bell at Cafe Grumpy.
Ms. BELL: Over the five years I think maybe weve increased prices twice, so maybe, I dont know, 10 cents, 20 cents.
HERMAN: Schoenholt doesn't believe that higher prices will lead coffee drinkers to abandon their daily habit.
Mr. SCHOENHOLT: I never worry about consumers giving up on coffee. I think it is so engrained in the American lifestyle that they will always reach for a cup.
HERMAN: If prices keep rising, they may more likely to reach for that cup at home or settle for a smaller size.
For NPR News, Im Charlie Herman in New York City.
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