RSS
Twitter
Linked In
News In

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Starbucks slows coffee hedging as market weakens

Twitter Linkedin

Quick, quick, slow.

 

Starbucks, after a rapid start to 2017 for hedging coffee beans, has taken its forward purchasing drive off the boil as arabica prices have eased.

 

As of late July, the group had priced 70% of its coffee needs for its current financial year (which ends next October), well ahead of a comparable figure of “more than 50%” a year before.

 

Three months later – a period during which arabica coffee futures have dropped some 20% on a spot contract basis, undermined by some big hopes for Brazil’s 2018 harvest - Starbucks has progressed this year’s hedging total by only a further 5 points, to 75%.

 

That narrowed the advance over last year, when the coffee giant revealed a figure of “about two-thirds” for its pricing progress.

 

And it left the group well behind its pace two years ago, which had reached “over 90%” by now.

 

‘Competitive pressures on the rise’

 

OK, in theory, there is another possible explanation for the marginal advance in Starbucks’ percentage hedged figure – that its coffee needs have grown substantially, meaning it has a bigger purchasing requirement than originally thought.

 

However, that looks unlikely given that reported sales growth at established global cafes in the quarter to October 1 of 2%, below the 3.2% expected by investors, according to Consensus Metrix.

 

The group also cut its long-term target for earnings target growth to “12% or greater”, from a previous figure of 15-20%.

 

Scott Maw, the group’s finance director, told investors that “competitive pressures” were “on the rise”, although underlying earnings per share for the latest quarter, at $0.55, were in line with market forecasts.

 

And, as to whether the coffee strategy has worked, at least Mr Maw could say that "neither foreign exchange nor commodities are expected to have a major impact on year-over-year profit growth" ahead.

 

Still, shares in Starbucks shares stood 3.3% lower at $53.07 in after-hours trading.

Twitter Linkedin
Related Stories

Ag commodity prices face further pressure, says SocGen, urging sell bets

The bank sees scope for forward prices of the likes of corn, cotton, hogs and wheat falling well below investor expectations

Details on Chinese agricultural commodity imports for October

Chinese customs data show jumps in imports of the likes of barley, rapeseed and wheat last month, but falls in sorghum and DDGs

Evening markets: palm oil tumble blows cloud over rapeseed, canola market

Palm oil futures defy the rule that ag prices don’t move much on days when US markets are closed. White sugar futures gain

Cotton top soft commodities bet for 2018, sugar the worst - Rabobank

Still, even sugar looks poised for price gains, as Brazilian output falls, the bank says. Cocoa, coffee outlooks score as reasonably bullish
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

© Agrimoney.com 2017

Agrimoney.com and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069