It’s a dark day for some coffee drinkers. Yes, today is the day the price hikes announced by Starbucks Corporation(NASDAQ:SBUX) last week go into effect. Drink prices will rise by a nickel to 20 cents in stores on some drinks. Next month packaged coffee prices sold to grocery stores will rise by $1 to $9.99 per bag.
In the last month The J.M. Smucker Company(NYSE:SJM) and Folgers have also raised coffee prices, in their cases citing rising commodity prices. The knee-jerk reaction is to point to these hikes as another sign of inflation. From there we could launch into an angry screed about the perils of low interest rates, the victimization of American consumers and are plunging quality of life. But let’s dig a little deeper.
While coffee prices in the commodities pits are up dramatically over the last year they’re still down nearly 50% from where they stood in 2009. In fact, since April when it became apparent that a drought in South America wasn’t hitting crops as hard as feared raw commodity coffee costs have actually dropped by 20%.
You can see the full “Breakout” segment below: