Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Surging Coffee Commodity Prices Trigger Consumer Pain, Investor Gain

Commodities / Coffee Sep 27, 2010 - 05:02 AM GMT

By: Money_Morning

Commodities

Kerri Shannon writes: Starbucks Corp. (Nasdaq: SBUX) has announced that it will charge more for many of its drinks to compensate for surging coffee prices, which have climbed to their highest level in 13.

The famous coffee chain announced Wednesday it would make "targeted price adjustments on certain beverages in certain markets," according to a press release on its Web site.


Starbucks said it tried to hold off on the change, but the continuing climb of green Arabica coffee bean prices - along with the costs of sugar and cocoa - forced the company to offset rising expenses.

"Over the last six months a highly speculative green coffee market and dramatically increased commodity costs have completely altered the economic and financial picture of many players in the coffee industry," said Howard Schultz, Starbucks chairman, president and chief executive officer. "But the extreme nature of the cost increases has made it untenable for us to continue to do so and we have been forced to take the steps we announced today,"

The company will keep the prices of its tall sized coffee drinks, but raise prices on larger-sized, "labor-intensive" beverages. Starbucks brand products sold at retailers will be unaffected, but the company did not rule out raising the price of packaged coffee in coming months.

Coffee has climbed 54% in the past year, and 41% since June. Money Morning Contributing Editor Jack Barnes, who examined the price surge in an article this week, said three main factors are pushing prices to new highs: Bad weather in Brazil and Colombia, a 10-year low for U.S. stock piles, and the planned supply hoarding by main exporters Brazil and Vietnam. These three countries make up the biggest coffee exporting nations, with Brazil holding 38% of the market, Vietnam with 14.5% and Colombia at 12.3%.

"Little wonder coffee prices are at 13-year highs, and coffee futures have zoomed 44% since June," said Barnes. "Expect the trend to continue. Coffee prices are going to rocket another 30% from here."

Barnes warned that the price climb would result in hikes at local coffee shops and retailers.

"The J.M. Smucker Co. (NYSE: SJM) - parent of the Folgers, Dunkin' Donuts and Millstone brands - has raised prices 10%," said Barnes. "The Maxwell and Green Mountain brands also are raising prices as their margins get squeezed. Trust me, you're going to see many more such announcements come along: These are just the first of many trickle-down price increases for consumers, who can expect a flood of these events in the months to come as retailers pass on the increases to their customers."

Also pushing retailers' prices higher is sugar, which on Friday rose to its highest price in almost seven months. Brazil - the largest grower of sugar - is in a drought that has pushed water levels in the Amazon River to their lowest level since 1963, and may lower its production estimate to about 560 million metric tons from 570.2 million tons.

Cocoa for December delivery rose 0.5% Friday to $2,974 a ton, for a weekly gain of 1.7%.

Dry weather in South America will continue until mid-October, and coffee and sugar prices continue to gain, meaning U.S. shops and retailers that have yet to raise prices might not have a choice in coming weeks.

Of course, what might hurt consumers' wallets could also help their portfolios.

"The price of green coffee beans has a chance to break out to historic high prices in 2011," said Barnes. "While I am bullish on coffee in the intermediate and long terms, I believe there is a very real possibility that we'll see a pullback in the coming days or weeks. Once that occurs, however, I would urge investors to take a really careful look at coffee as a top profit play, particularly given the demand, hoarding and weather-related catalysts - all of which are bullish for coffee prices."

Source : http://moneymorning.com/2010/09/26/coffee-prices-2/

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in