Schultz passes the (Star)buck to speculators for rising coffee prices

The father of the £3 coffee blames speculators for the price of beans.

by Emma Haslett
Last Updated: 06 Nov 2012
After an outburst against commodities speculators by Premier Foods boss Robert Schofield last week, Starbucks president Howard Schultz has jumped on the bandwagon, criticising the role speculators have played in driving up the price of coffee, the Telegraph reports this morning. Prices have risen from $1.27 per pound this time last year to $1.97 in January and $2.31 per pound last month. Like Schofield, Schultz warned that the current peak in prices is nothing to do with supply and demand – and is merely down to a ‘very strange and almost inexplicable phenomenon in the commodities market’.

On a tour in the UK to promote his new book (which, incidentally we reviewed in our latest issue), Schultz said it’s the first time in his 30 years in the coffee industry where speculation, rather than supply and demand, has dictated prices, and called for increased transparency in the commodities market. ‘I don’t know the rules and regulations in the UK but unfortunately in the US you can’t identify who is buying the commodities.’ Thus, those driving up the prices have no one to answer to.

Now, don’t get us wrong: given that Starbucks was the instigator of the much-censured five dollar cup of coffee, chances are it hasn’t had too much trouble absorbing the extra costs. It certainly looks that way: last month, the company reported a bumper second quarter, with sales increasing by 10% to $2.8bn. But Schultz, being the considerate chap he is, added that it’s those at the bottom of the supply chain he’s worried about. ‘I am not convinced that the farmers benefit from this,’ he said, with the implication that prices paid to the producers haven’t gone up much – the ones making the money from this are the speculators. To be fair, Schultz probably has a point: but it's hard to know what can be done about it.

So far, the effect on the price of our morning latte has been minimal. But if the price of coffee continues to go up, it might only be the speculators who can afford to shell out for a daily Venti – the rest of us will have to plump for a Nescafe, instead…

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