Tags: Smucker | Cut | Coffee | Prices

Smucker Cuts Folgers, Dunkin' Donuts Coffee Prices for Second Time

Tuesday, 15 May 2012 01:28 PM

U.S. consumers should be paying less for their Folgers and Dunkin' Donuts coffee shortly, after J.M. Smucker Co. said on Tuesday it was cutting prices on its brands by an average of 6 percent.

The move was long overdue, given the 45 percent drop in green coffee prices since last May, commodity traders said.

This is only the second time since August that the largest U.S. coffee packager has dropped its list prices for Millstone, Cafe Bustelo and its other brands.

More U.S. roasters are expected to follow suit.

Arabica coffee prices on ICE Futures U.S. exchange more than doubled in an 11-month rally that ended in May 2011 at a 34-year high of $3.0890 per lb. In response, roasters raised prices four times, with Smucker increasing its list prices by some 38 percent between May 2010 and May 2011.

Futures prices subsequently dived nearly 45 percent to hit $1.7220 per lb on May 9th, the lowest level since August 2010.

Smucker was the first large U.S. roaster to announce a cut in its list prices, lowering them by 6 percent in August 2011, but the company has not made more cuts even after the continued coffee prices continued to decline.

"It's about time," said one trader on hearing the news on Tuesday.

Roasters have been absorbing the higher costs of beans they bought when prices were rocketing last year.

Business has been slower than usual this year as roasters work through that higher-cost inventory, U.S. importers have told Reuters.

While arabica coffee is typically roasted and used in brewed blends, the cheaper robusta beans that are traditionally processed into instant coffee are also used as a lower cost component in roasted blends.

Robusta coffee futures on LIFFE nearly doubled in a nine-month rally ending at $2,672 per tonne in March 2011. They are now down around 20 percent at a near eight-month high at $2,164 per tonne.

Other U.S. roasters often follow Smucker's price moves.

A spokeswoman at Kraft Foods, which makes Maxwell House coffee, said the company had no news when asked if the company was changing its coffee prices.

Higher prices were partly to blame for a 10 percent drop in overall sales volumes during the third quarter for Smucker, which also makes Jif peanut butter, another brand that saw price increases due to rising costs of raw materials.

The company had indicated earlier that other commodity costs were "stabilizing" and that it may tweak prices on products in the face of weaker consumer demand.

Shares of the company were up 2 cents to $77.08 in early afternoon trade on the New York Stock Exchange.

© 2017 Thomson/Reuters. All rights reserved.

   
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2012-28-15
Tuesday, 15 May 2012 01:28 PM
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