In basic economics taught at the high school level the charts of supply and demand are taught. It is done for a couple of reasons – if guns and butter are the example, if you produce more guns, you will likely produce less butter and vice versa. The basics are always what you have to go back to as you evaluate companies.

In an article by May Angel, Marcelo Teixeira and Jessica Dinapoli of Reuters, the supply and demand will affect coffee prices.

In the past year, the cost of arabica coffee beans has near doubled owing to 4 successive seasons of deficit as adverse weather makes it harder to grow enough of the delicate bean to meet consumer demand.

Coffee roasters are pushing for increased prices, however grocery stores and supermarkets are pushing back to postponing signing new supply deals to the point some grocery stores have run out of stock. In Holland, the Dutch supermarket chain Albert Heijn ran out of product. When the shelves were restocked, the prices were higher.

One of the world’s largest coffee roasters is JDE Peet purchase prices have increased significantly.

In Brazil, which is a global supplier of coffee beans, one of the worst droughts on record happened and supply decreased.

According to Reg Watson, director of equity research at Dutch Bank ING, prices are expected to rise between 15 to 25%.

A large Brazilian roaster called 3 Coracoes raised roast and ground prices by 14.3% on March 1, having previously raised prices 10% in December and 11% in January. In Brazil, prices in the stores have increased 40%.

Data prepared for Reuters by market research firm Nielsen show the volume of roast and ground coffee sold in North America and Europe the world’s biggest consuming regions fell 3.% as prices rose 4.6%. As prices rise, the consumer either buys less or pays more.

JM Smucker owns Folgers which sells to Walmart and Target, expects a decline in volume starting in May as it will raise prices again, its CFO Tucker Marshall said at a conference call.

Consumers are more willing to trade down from brands to private label or in-house brands produced for the supermarket to cut on costs and provide cheaper alternatives.

Linking to dividend paying stocks, in commodity-based companies, the supply and demand is a critical feature to be examined. At what cost will consumers move from name brands to private label brands. People have a reasonable idea giving the normal demand, but how much for a cost factor determines what people will do? It is both an art and science.

There are more questions than answers, till the next time – to raising questions.