Coffee bean prices still draw investors

The coffee bean is already at a 13-year high but investors can't get enough of their caffeine fix. Prices of arabica and robusta beans may rise by as much as 10 per cent over the next two months, the Coffee Exporters Association of India said. "There is big business in owning land and harvesting coffee or investing in the futures directly," said Hussein Awada, the owner of the Lebanese Roastery, which is based in Abu Dhabi.

"Bad weather is dropping the yield down, farmers are leaving the farms and moving to the cities." Arabica coffee futures rose in June as a combination of poor harvests in Central America and speculation among fund managers drove prices higher. "People are saying that after cocoa, wheat, gold and petroleum, coffee is a good investment. "We see more fund flows in coffee," Ramesh Rajan, the president of the Coffee Exporters Association of India told Bloomberg.

December-delivery arabica reached $1.8865 a pound on ICE Futures US on Monday, the highest intraday price since September 11, 1997. Yesterday the bean traded at $1.8280 a pound. JM Smucker, based in the US, said on August 3 it increased prices for most of its brands, such as Folgers and Dunkin' Donuts, by an average 9 per cent because of higher raw bean prices. Kraft Foods in May raised the price of some of its Maxwell House and Yuban roast and ground coffee in the US by about 4 per cent.

Mr Awada is hoping next year's crop will be large enough to prevent further price rises. "Coffee is the backbone of my business. In 35 years, we have hiked our prices twice only." [e-mail]