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Dunkin' Donuts raises prices: Why your coffee is becoming more expensive (+video)

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(Read caption) L.A. Times Business Columnist, David Lazarus joined us live to discuss Dunkin' Donuts expanding to California, but will raise prices and a new study that says CEOs tend to be taller than average. This segment aired on the KTLA 5 Morning News on June 10, 2014.

A cup of coffee is part of many Americans' morning routines, but it may be becoming more of a splurge.

Dunkin’ Donuts will raise prices on its coffee in stores by “a little bit…but not by much,” Nigel Travis, CEO of Dunkin’s parent company Dunkin’ Brands, says to Yahoo. Coffee competitors are raising prices because of “upward pressure,” he says, due to unfavorable weather and a coffee fungus affecting crops in Central America. 

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The announcement comes a week after the public learned that prices of Dunkin’ Donuts’ packaged coffee products, sold in grocery stores, would also increase. J.M. Smuckers, which  has a licensing agreement with Dunkin’ Donuts to sell its coffee products in retail, announced last week that prices for products like coffee grounds would go up nine percent. 

This past weekend, Kraft Food Group Inc. announced a 10 percent price hike for  its Maxwell House and Yuban retail coffee brands. Starbucks will not raise its prices because it has protection for 2014, CEO Howard Schultz told Fox Business in March. In other words, Starbucks negotiates and sets its coffee purchase prices for a number of years, insuring them against paying more in the event of supply problems like droughts and disease. 

US coffee prices increased by 3.4 percent in April, according to the International Coffee Organization’s latest report, released last month. Wholesale prices peaked at $1.70 per pound in May. Why? Because there is a global coffee shortage.

One reason behind the shortage – and the price increases – is the weather in coffee-growing countries. An El Niño weather event could come earlier than expected this year and could hurt coffee supplies, according to the ICO report. Brazil, one the largest coffee producers in the world, also has been experiencing a severe drought since January.

Another factor is coffee rust, “the most economically important coffee disease in the world,” according to the American Phytopathological Society. Coffee rust is an airborne fungus that causes yellow spots in coffee plant leaves, causing them to fall off. It affects nearly all coffee-producing countries, though infection rates vary.

What does this mean for farmers? It hurts their yield. Coffee rust causes coffee growers to lose about 2.7 million 132-pound bags of coffee in Central America, costing the region $500 million, according to the ICO. About 374,000 jobs were also lost in 2012-2013 due to coffee rust.

There could be some relief ahead. Since peaking in May, coffee prices have drifted down to $1.46 per pound as of June 9, according to the ICO. But it could take some time for those cost savings to reach consumers. 

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