With coffee supplies falling, consumers can expect to pay more for that morning cup of joeThe price of coffee beans has been rising steadily over the past year - along with most commodities - as supply interruptions have caused global stockpiles to plummet. According to a newly released report, consumers are beginning to feel the price increases at the cash register as companies move to raise prices as they endeavor to make business cost reductions.

Bloomberg reports that Colombia, which is the world's second-biggest maker of mild arabica coffee, said that consumers will have to adjust to higher prices as burgeoning global demand continues to outstrip inventories. Companies like Starbucks and Nestle, which heretofore have absorbed the rising prices, will soon offset them onto consumers as they look to improve their profit margins amid heavy investor scrutiny.

Colombian National Coffee Growers Federation (CNCG) chief executive officer Luis Munoz said that the group forecasts next year's production to fall short of consumption, keeping the cost of arabica coffee between $2 to $3 per pound for the next 12 months.

As a result of the increasing costs, Starbucks, an expert in strategic sourcing, said Wednesday that consumers will see a 17 percent price hike for its packaged coffee offerings at its U.S. retail stores starting July 16. CNN reports that the move was the first time the world's biggest coffee company has raised packaged coffee prices since September 2009.

Over the course of the last 12 months, coffee futures have jumped more than 95 percent in value as supply and demand fundamentals sparked a run-up in prices. Aside from Starbucks, a cavalcade of other coffee sellers have started to offset higher coffee bean prices on consumers as they endeavor to achieve procurement cost reductions.

J.M. Smucker, which owns Folgers, Dunkin' Donuts and Millstone, has raised prices more than three times this year alone. This week, the company said it will raise prices by an additional 11 percent for most of its coffee products, following a 10 percent hike it made in February and another 10 percent increase it levied on consumers in August.

Kraft Foods, which owns Maxwell House Coffee and Yuban, has likewise increased coffee prices a number of times since the beginning of the year, adding roughly 70 cents per pound to its ground coffee offerings.

What's more, Green Mountain chief executive Larry Blanford said earlier this month that the company, which commands a strong market share in the increasingly lucrative packaged coffee cup sector, will have to raise prices to combat tight supplies.

"In an attempt to offset rising green coffee costs as well as increases in other input costs we are currently in the process of raising prices for all package types," Blanford said on the company's earnings conference call.

Currently, CNCG projects the Colombian coffee harvest will improve during the second half of the year. Coffee harvests were hit hard by inclement weather that caused flooding and destroyed crops throughout the South American country. Munoz said that CNCG analysts peg 2011 production at about 9.5 million bags, representing a slight rise from the 8.9 million bags recorded in 2010.

Still, U.S. consumer spending improved only modestly in April, inching up 0.4 percent. Analysts have largely attributed the weak increase to the higher energy and food prices that consumers are being forced to absorb, but some industry watchers question how much longer the nascent economic recovery can be sustained if consumers are spending significantly more to buy the same amount of food and gas.

On the New York Mercantile Exchange on Friday at 12:25 p.m., coffee futures for July delivery were up 1 percent, or $2.75, to trade at $2.6835 per pound.
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