RSS
Twitter
Linked In
News In
News
Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Starbucks slows pace of coffee buying, even as prices rise

Twitter Linkedin

Starbucks, in its first comments on its coffee hedging strategy for its next financial year, revealed it has dramatically slowed the pace of forward bean purchases, even as arabica prices have revived.

The coffee giant, unveiling quarterly results which showed sales growing slower than Wall Street had expected, revealed it was "over 50% price locked [on coffee] for fiscal year 2017", which starts in two months' time.

The figure is well below the rate at which it had bought coffee forward a year ago, in a declining coffee market.

In July 2015, Scott Maw, the Starbucks finance director, said that the group was "now over 80% locked for coffee costs" for the current financial year.

'Take careful advantage of lower coffee prices'

The latest comment would appear to question how successful Starbucks proved in exploiting the weaker coffee prices which prevailed until last month.

Mr Maw said in April that "we will continue to take careful advantage of lower coffee prices, while ensuring that we source only the highest quality coffee and provide fair economics to coffee growers".

However, weakness in coffee prices lasted only for a further month, before a jump of more than 20% in New York arabica coffee futures, which on a spot contract basis topped 150 cents a pound last week for the first time in 16 months.

Prices have been boosted by weather setbacks to robusta coffee crops in many major producing countries, including Brazil and Vietnam, besides by a reluctance by Brazilian arabica growers to sell their bumper harvest, with stocks depleted by disappointing results to the two previous harvests.

New York's spot September arabica coffee contract stood at 146.30 cents a pound in early deals on Friday, down 0.4% on the day.

'Lower commodity costs'

The weaker coffee costs that Starbucks locked in for its current financial year, with all its needs hedged by April and potentially before, fuelled a rise of 0.3 points to a record 19.5% in its operating margin in its third fiscal quarter, which ended on June 26.

"The [margin] increase was primarily due to sales leverage and lower commodity costs, primarily coffee," Starbucks said.

However, a rise in sales of 7.3% to $5.24bn fell some $100m short of market expectations, as takings at stores open at least 13 months rose by 4.0%, short of the 5.6% growth expected, according to Consensus Metrix.

Starbucks' Nasdaq-listed shares stood 2.7% lower at $56.07 in after-hours trading.

By Mike Verdin

Twitter Linkedin
Related Stories

Abares lifts hopes for sugar futures, but cuts its cotton price forecast

A downgrade to Australia curtails an upgrade in world sugar output expectations. But for cotton, Abares ditches ideas of a global production deficit

Evening markets: Ags poop party lifting other commodities, shares

Wheat futures set another contract low, while arabica coffee hits its weakest close but one in 19 months, despite buying in other asset classes

Australia cuts wheat export hopes, pegs canola shipments at 7-year low

The country’s Abares bureau sees a dent to wheat shipment prospects from a smaller harvest, but lifts expectations for coarse grain exports

Hedge funds turn net bullish on ags - ahead of price drop to historic low

Speculators are wrong-footed in soymeal, in which they hike bullish bets just before a price tumble. But they fare better in cotton and cocoa
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© 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