Tuesday, October 29, 2013

Has your favorite coffee beverage gone down in price? (WSJ and FINVIZ)

Historically, coffee prices (ICO Composite Indicator) have been above $1.00/lb though through the 90's a new low was established at $0.41 in 2001 and stayed low through 2004 before accelerating and peaking in 2011.  Today's price hovers above $1.00/lb.

Coffee continues to express all sorts of weakness since peaking in 2011.  Recent news suggests that coffee stores are flush (circa 2009) and prices are not expected to rebound anytime soon.  The crop forecast for Brazil (producing 1/3 global supply) is also good into next harvest (mid-2014).  Expectation by some traders is price will remain depressed until demand recovers, and may hit $100 before there are any substantial improvements in global price.  (WSJ September 2013)

With prices as depressed as they have been, you would think that the price of a cup at your favorite outlet might adjust - though that depends on how much of a cup of coffee is affected by the price of the raw materials - which in many cases is not significant.  The rise in price of energy (i.e., transportation, roasting, etc.) and other factors has likely offset any advantages from lower raw material costs.  Another factor is that companies like Starbuck's negotiates their own coffee supply and prices through private contracts.

Watching and learning.  Trading on.

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