Finally, a Coffee Brake

Working like a well-functioning percolator, the market forces that drove raw coffee prices to record highs in April are now forcing prices down, down, down. In the past few months, Colombian green coffee has fallen from $3.34 per Ib. to $1.92, 43% below its April peak. Similar drops have taken place for other varieties of coffee.

One reason for the decline is the expectation of abundant harvests, especially in Brazil, which produces one-third of the world's coffee. What sent prices up in the first place was a freak frost in 1975 that damaged more than half of Brazil's coffee trees. Now, with the Southern Hemisphere's winter half gone and no hurtful frost so far, Brazil expects to have a much better crop this year--14 million to 16 million bags, double last year's harvest. Two other big coffee producers, Colombia and El Salvador, are fearful of a further decline in prices, and have been selling their large 1977 crops early.

Then there has been a dramatic decline in U.S. consumption. Faced with costs that drove even snackbar brew to 350 a cup and above, many Americans cut down on coffee. According to a 1977 survey by the National Coffee Association in three U.S. cities, consumption in the four months of March through June was 22% below last year's level. Result: roasters and wholesalers, who had stockpiled reserves in anticipation of even higher prices, have found themselves stuck with large inventories.

How far down will prices go? Some Brazilian coffee experts say that over the next 18 months or so the price of raw coffee could gradually decline to about $1 per Ib. on the New York market, which would translate into a retail price somewhere in the $2 range, depending upon quality and brand. That is just above what coffee cost before it zoomed off on its great roller-coaster ride.

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