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German Coffee Industry Warns of Retail Price Rises

Source: Reuters
17/03/2008

Hamburg, March 14 - German coffee retail prices are likely to rise because of the dramatically high levels of commodity futures markets, the head of the German coffee industry association DKV said on Friday.

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"The increases in commodity futures prices is so large that it is not possible for roasters to compensate through cost savings in the long term," DKV chief executive Holger Preibisch told Reuters.

"In the medium term, higher purchasing costs must be passed onto customers."

London robusta futures reached a 12-1/2 year high last week while New York Arabica futures are also around 10-year highs, mainly because investment funds and other speculators have moved more money into commodities as equity markets are weak.

The euro's rise to record high levels against the dollar, which makes imports cheaper, was not enough to compensate for the high level of dollar-denominated coffee futures, Preibisch said.

Preibisch criticized the high volumes of investment money being pumped into coffee and other commodities, which can cause sudden rises in futures.

"For the food industry, which have to orientate (their costs) towards futures, the increasing financial investments in commodities markets are a burden," he said. "Food companies lose their planning security because of increased financial investments in futures and must face higher purchasing costs."

"On the bottom line, financial investments in food commodities will be to the disadvantage of consumers who have to pay more for their groceries in supermarkets."

Meanwhile, German coffee traders said retail price rises had already been imposed in recent days.

"The first price increases have already been agreed between roasters and retailers," one German coffee trader said. "More price increases are expected if futures markets stay so high."

The last round of retail price increases by German coffee companies was in late December 2007. The decision by several large roasters to raise prices almost simultaneously sparked an investigation by German competition authorities.



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