COFFEE – Weekly Chart
The weekly chart of coffee futures shows another push near the all-time highs and a further breakout could lead to added pressure.
Coffee has become a staple for consumer diets and a year long surge has pressured the price of company’s that brew coffee. Starbucks stock was flat year-to-date, underperforming other sectors in the S&P 500’s rally. China’s Luckin Coffee suffered a similar performance over the last year.
The commodity stress is not only happening for coffee makers as snack companies have been seeking to hedge recent gains in the cocoa price. Cocoa is up a staggering 380% from its 2023 lows to new all-time highs.
Shrinking global cocoa stockpiles are limiting losses in the price and inventories held in US ports have been trending lower for the past 2 years with stocks now at a 20-year low of 1.3M bags.
Cocoa has recent support from slower Ivory Coast cocoa exports which could tighten global supplies. Government data said Ivory Coast farmers shipped 1.16 MMT of cocoa this marketing year, up more than 27% from last year.
Cocoa prices were also boosted by news that chocolate maker Hershey Co. said it sought CFTC approval to buy a large amount of cocoa through the ICE Futures Exchange due to tight global supply. Hershey wanted to take a position allowing it to purchase more than 90,000 MT of cocoa. The purchase size is more than nine times what the exchange currently allows and exceeds a federal position limit of 4,900 contracts.
Investors should note these trends when trading companies involved in commodity consumer stocks. Price dislocation could create opportunities if commodities reverse their path.