FOR IMMEDIATE RELEASE: September 6, 2010
SCHUMER: 35% JUMP IN COFFEE PRICES HAS AMERICANS PAYING MORE FOR THEIR CUP OF JOE; SENATOR URGES FEDS TO LEAN ON MAJOR PRODUCERS LIKE BRAZIL, VIETNAM THAT MAY BE LIMITING GLOBAL SUPPLY
12-Year High in Coffee Prices Is A 'Grind' For Consumers—Brand-Name Companies like Folger's, Maxwell House Have Had To Hike Retail Prices
Anxious To Keep Prices High, Vietnam Currently Weighing Plan To Stockpile Coffee Beans And Keep Them Off World Market; Growers in Brazil, Which Is World's No. 1 Coffee Exporter, Pressing Their Gov't to Pursue Similar Plan
WASHINGTON, DC—With coffee bean prices hitting a 12-year high last month, U.S. Senator Charles E. Schumer (D-NY) urged the Obama administration Monday to press the world’s leading coffee exporters like Brazil and Vietnam to abandon any stockpiling plans that could drive prices even higher.
The government of Vietnam, which is the world’s top exporter of robusta coffee beans that are used for instant coffee, is considering a scheme to stockpile up to 200,000 tons of the crop in order to keep global prices rising. It would be the second such hoarding plan Vietnam has undertaken this year, coming after it bought up more than 60,000 tons of its own coffee last spring. Meanwhile, growers in Brazil, which is the world’s overall No. 1 coffee producer, have been pressuring that country’s government to consider a similar plan since May. In response, Schumer is sending a letter to U.S. Trade Representative Ron Kirk urging him to confront this proposed stockpiling at this month’s meeting of the International Coffee Organization (ICO). The group, which has 88 member countries and considers coffee trade prices and policy, convenes on September 20.
“Some fluctuation in coffee prices is normal, but this high is historic and it could have staying power. It shouldn’t break the family bank for Americans to get their coffee fix,” Schumer said. “Stockpiling by the world’s top coffee exporters could make a bad problem worse and cause prices to soar even higher. We need to pressure these countries to start playing by the rules of the game again. They would be acting like the OPEC of coffee.”
Since June, coffee futures have shot up 35 percent, due in large part to crop problems in South America that have limited supply. U.S. stockpiles of coffee, meanwhile, are at their lowest levels in 10 years. This rise in global coffee prices is hitting U.S. consumers hard. Last month, JM Smucker, the company behind retail coffee products like Folger’s and Dunkin’ Donuts, announced it was raising prices at stores by 9 percent. Kraft Foods, which produces Maxwell House coffee, has followed suit . Some coffee retail chains—like Starbucks—are attempting to ride out the trend without passing the heightened costs onto consumers, but others have been forced to bow to cost pressures. For instance, Wawa, which operates roadside gas stations and markets in the mid-Atlantic region of the U.S., announced a modest per-cup increase on August 30.
Stockpiling by major producers would only add to this price rise. In addition, Schumer said, it would violate the International Coffee Agreement of 2007.
A copy of Schumer’s letter to Kirk is below.
September 6, 2010
The Honorable Ron Kirk
United States Trade Representative
600 17th Street, NW
Washington, DC 20508
Dear Ambassador Kirk,
I write to express concern about reported coffee stockpiling plans by major coffee-producing countries. Such stockpiling would exacerbate already record high coffee prices and short-term supply problems. I respectfully ask you to use the September 20-24 meeting of the International Coffee Organization (ICO) to urge exporting members to eliminate or avoid adopting such plans.
In recent months, world coffee prices have surged to a new 12-year high. Recent news reports indicate that Brazil and Vietnam are considering stockpiling coffee to force prices up even further and to ensure that prices do not plummet once new crops reach the market later this year. These reports are troubling.
Brazil and Vietnam are the world’s largest coffee exporters, accounting for approximately 45 percent of average world production and exports over the past 10 years. Needless to say, stockpiling by the two largest producer countries would have adverse economic consequences for importing countries, as well as for consumers around the world. As the world’s largest coffee importer (the U.S. accounts for 21 percent of total coffee imports by all importing countries) and an active member of the ICO, the United States has a significant interest in ensuring that ICO members avoid taking actions that may hinder fair trade in coffee.
Stockpiling with the deliberate intention of pushing up prices would appear inconsistent with the objectives of the 2007 International Coffee Agreement, and I urge the U.S. delegation to the upcoming ICO meeting to question Brazil and Vietnam about recent reports regarding stockpiling plans, as well as other developments in the coffee markets including producer country efforts to build and manage stocks. I also ask that you please keep me apprised of developments on this issue.
Charles E. Schumer
United States Senator
cc: Mr. David Brooks, United States Representative to the International Coffee Organization
Director of Natural Resources Policy & Environment
Office of the United States Trade Representative