Dealbreaker Opening Bell
Seattle Post-Intelligencer
Now that fears over oil prices have settled down post-Labor Day, post-Hurricane Season, and post-Tensions Over Iran, here's a new economic boogeyman to watch out for.
Prices for arabica coffee beans on the New York Board of Trade could climb more
than 20 percent in the next 12 months and outperform some of this year's best
commodities investments, including copper and silver.
I counted eight forward-looking statements in the Bloomberg article the SPI ran, all dressed up to look like facts. That is a lot of ifs and maybes shoring up the assertion that we're going to pay more per cup in the near future. The coffee business is not my field, but as a slave to the bean, it's something I watch with interest.
What's not reported is that everyone in the coffee business hedges their supply. Companies that buy beans buy futures, paying a predetermined price on beans that haven't been harvested yet. Additionally, the supply chain stocks up and warehouses beans when they've got an especially good price, smoothing out the curves in their moving average cost.
Also not reported in the article is the colossal gross margin coffee retailers deliver on the finished product. Unlike airlines, coffee retailers have no problem swallowing short term comodity increases and still deliver what by retail standards is stellar net income.
Now, if you will excuse me, I need to go get a refill. Sphere: Related Content
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