Coffee prices have been cut by nearly half from their peak. Many purveyors have passed on the savings to their customers, but not Starbucks. If that was not enough, Starbucks recently increased prices the timing of which is pointed out on the annotated chart. But regardless of the price of a cup of coffee, the question for this column lies in whether or not falling coffee prices will have any impact on Starbucks stock.
Please click here for an annotated chart.
The chart compares the stock performance of Starbucks SBUX, with the iPath Bloomberg Coffee Subindex Total Return ETN JO. Even though it is better to trade coffee futures, I have chosen the ETN because not many investors trade futures. The Y axes scale on the chart is percentage gain or percentage loss starting from the beginning period of the chart.
Where are coffee prices headed?
The chart starts from the last peak in the price of coffee. Coffee had run up due to drought and “rust” in some of the world’s major coffee producing areas. Coffee rust is caused by a fungus, la roya. Famously, this fungus became so wide spread in Sri Lanka back in 1860 that Sri Lanka was forced to destroy all coffee plantations and start growing tea…Read more at MarketWatch
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