When I was in college, coffee was essentially a state-sanctioned performance-enhancing drug - steroids for writers. But coffee's status has changed. You can now attend professionally organized coffee cuppings (think wine tastings for coffee), where, if you're lucky, you could get your palate on rare coffees costing $15 a cup. You can also skip the whole university thing and just go to China, because they just opened the first official Chinese barista school.

Once you've got the sheepskin, you can compete in the world barista championships. Coffee producers and cafés are doing their best to promote the culture of coffee. But one of the mainstays of that culture - Starbucks - is making a few adjustments in its plan to take over the world. This week's headlines about Starbucks' plan to close 600 stores and lay off about 7% of its workforce gives us an excuse to stick a little pod into our one-cup brewer and take a look at what's really going on in the coffee market, our first since January.

 

Coffee, Weekly Average Price (The Long View)

 

Soon after we looked at coffee back in January, it hit record prices in February on a combination of supply concerns and inflation hedging. Prices soon retreated off the high, but not back down to levels more typically seen in years before. More recently, things have been looking up.

 

Coffee (KC, ICE [NYBOT]) Daily Commodity Futures Price Chart: July 2008 Contract

 

 

Right now, coffee prices have been edging upward again - this time because of the weaker dollar (surprise - it's not just oil that is priced in dollars); the threat of cold weather in Brazil (it's winter down there, you know); and the expectation that the European Central Bank will raise interest rates. Of those three items, only one - the weather - directly affects the crop. The others are just the price we pay for our global economy.

The Crop

Brazil is the world leader in coffee production and consumption.