Starbucks chief blames high coffee prices on speculators

The logo for Starbucks coffee is seen surrounded by empty bottles of wine.

JEREMY HOBSON: Well if your cup of coffee is more expensive than usual this morning Starbucks CEO Howard Schultz says don't blame him. He says speculators are causing coffee prices to soar. On a visit to the U.K., Schultz, said market manipulation has driven the price of beans to a 34-year high.

Marketplace's Stephen Beard reports.

STEPHEN BEARD: Last month coffee cost an average of $2.31 a pound. That's almost double what it was a year ago. This is not due to supply and demand, claims Howard Schultz. The Starbucks chief told the BBC that speculators have been covertly pushing up the price of coffee and other agricultural commodities.

HOWARD SCHULTZ: I wish there was a lot more transparency involved in the process in which we could really understand what the index funds, the hedge funds are doing. It's a very strange phenomenon.

Schultz wants the regulators to wake up and smell the coffee and investigate. But Keith Flury, commodities analyst at Rabobank says there's little mystery about the high coffee price. Supply is being outstripped by demand especially in emerging markets.

KEITH FLURY: There's a lot more competition for the beans internationally not just from cafe drinkers in Europe but cafe drinkers in China as well as drinkers in Brazil themselves.

Helping to drive that demand, he says, is the huge growth in the number of cafes -- like Starbucks -- opening up around the world.

In London I'm Stephen Beard for Marketplace.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.
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Another executive of a major business entity that does not understand macro economics.

Was he complaining over the past several years when coffee prices were stagnant/constant as world demand went up?

Does he understand the tremendous inflationary economic tactics the obama administration has implemented, including the printing of US Dollars and borrowing twice its annual income!?

The value of the US dollar is nose-diving due to bad decisions by the obama admin. Commodities speculators deal in the future .... the future of the US Dollar is just plain ugly, continues to go down, which in-turn causes future prices of commodities to go up!

Basic macro economics Howard!

I am sure Schults is talking about the green bean minus the differential, freight and roasting cost. Finish product is at around $5.21 per pound. Now if your Starbuck I am sure they can do better than my local chain, but bottom line is a year ago we were at the $2.65 range. That hurts! Speculation is the problem and you see it as commodoties are moving in tandem. One is up and they all are up. The goverment needs to wake up and smell the cup of Coffee before the average American will be spending all of thier income on food and energy.

Let's not forget the side cost of everything else that is somehow built into your latte before your estimate goes out of bound..

I am amazed to hear that Starbucks are only paying $2.30 a pound. They probably use 1/2 an ounce per cup of coffee - around .07 cents but are being paid $2.00 - $4.50 a cup. Makes you wonder what the poor coffee growers are being paid after the coffee has gone through brokers and distributors - Isn't is supposed to be Fair Trade coffee?

One of the implications of these remarks is that coffee prices are somehow "too high". I wonder if Mr. Schultz feels that the value of coffee is overstated by prices at the +$2.00 level, or if he has identified an appropriate value for coffee. From where I sit, the real intrinsic value of top quality coffee is well above the $2.00 mark.

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