This is serious and I don’t care about rising oil prices, surging 10 year bonds or the rebound on Wall Street.

Subprime mortgages now leave me cold and the Federal Budget tonight is a boring non-event.

All that concerns me is that coffee and sugar prices are rising.

Who cares if wheat costs more, or corn is more expensive, or if meat prices fall because people are shying away from swine flu carriers?

Coffee and sugar prices are rising and I am now in mortal fear of mornings.

World raw sugar prices are up 30% this year, their highest level since early 2006 (when that big cyclone which flattened sugar cane around Innisfail and ruined the Australian banana crop) because India’s demand is rising faster than Brazil can produce additional sugar. While Indian demand is rising, production will be down this year. White, or refined sugar, is up 52%.

This is getting serious. You can’t use artificial corn-based sweeteners in coffee (high fructose corn syrup). It’s just not coffee.

World coffee prices hit a seven month high last week too, and look like rising past $US1.30 a pound (which would be up 24%) from their lows of last December when everybody was drinking booze and thinking of jumping from a building in the gloom after Lehman Brothers failed.

Commodity and sharemarket analysts had assumed that the global economic crisis would cut consumption and prices for coffee. They must be tea drinkers, or worse, yoghurt eaters, or worse still, Starbucks aficionados.

That forecast has been proven wrong, since demand for coffee has remained high, even while consumers have moved from cafés to home drinking. Starbucks has assisted with home consumption by being so unreceptive to people hanging around doing very little (AKA the underemployed) that they have closed hundreds of its outlets in the US, Australia and other markets.

In New York, the spot price of Colombian coffee — which commands a premium because it is sought after by Americans who claim to ‘know’ coffee (hah!) rose to almost $US2.20 a pound late last week, a 12-year high, due to supply constraints in Colombia (floods etc). Brazil, which is the world’s biggest producer of Arabica, the really good bean that puts the oomph in each cup, is talking about withholding beans from the market to help boost grower returns which have been hit by the financial crunch.

Kraft, the owner of the Maxwell House coffee brands, raised retail prices on its Colombian blend by almost 19% last month due to the rising prices of Colombian coffee beans. That’s inflation. But Maxwell House … yuk!

Nestlé is so shocked that it won’t tell the media if it is raising prices on Nescafé.

Down at my corner coffee shop, the price is still $2.50 for a short black, but somehow, I don’t think it will last.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey