Coffee Prices Plunge Amid Supply Concerns and Tariff Effects

Coffee prices fell significantly as concerns over tariffs and weather impact supply. Major brands like Starbucks and Hershey face pressure from rising costs, signaling potential volatility in their stock performance.

Date: 02-05-2025

AI Rating: 5

Market Fundamentals Influence Coffee Stocks

The report indicates that coffee prices have recently declined due to heightened concerns about tariffs and adverse weather conditions affecting crop yields. Such fluctuations in coffee prices can directly influence the stock prices of major companies like Starbucks, Hershey, and Mondelez International.

Earnings Per Share (EPS) and Profit Margins

Given the baseline 10% tariff on coffee imports, companies such as Starbucks and Hershey may experience squeezed profit margins, potentially impacting their Earnings Per Share (EPS). If these companies are forced to increase prices to maintain profit margins, demand may suffer, leading to lower sales volumes. Investors should monitor subsequent earnings reports for any declines in EPS and profit margins that could emerge from these heightened costs.

Supply Dynamics

The report mentions a mixed supply situation for coffee. While excess rain in Brazil may enhance soil moisture levels, projections from Rabobank and Conab suggest declines in production for arabica coffee due to previously dry weather conditions. Reduced supply will generally support prices; however, it’s worth noting that robusta coffee production is expected to hit record levels, which could create a divergence in price movements between the two types.

Investor Outlook

Investors may view the current situation with caution, assessing how major players in the coffee industry will adapt to the challenging market dynamics. Ongoing weather patterns, tariff impacts, and production forecasts will be key indicators to watch. Immediate stock price reactions could be influenced by quarterly earnings announcements as companies react to these commodity price fluctuations.

Stocks: SBUX HSY MDLZ