Coffee extended a rally to the highest since 1997 on signs that global demand will outstrip production as investors snapped up shares of U.S. retailers including Starbucks Corp. in a bet that sales will increase.
Green Mountain Coffee Roasters Inc., the largest U.S. seller of single-serve brewers, trades in New York at 295 times cash flow, more than any company in the Standard & Poor’s 500 Index, according to Bloomberg data. Arabica-coffee futures have doubled in the past year as adverse global weather slashed supplies including in Brazil, the world’s biggest producer.
Consumers are drinking more coffee in the past year as demand has rebounded amid the global economic recovery. Inventories monitored by ICE Futures U.S. have plunged to the lowest since April 2000. Green Mountain shares have jumped 47 percent in the 12 months before today, and Starbucks, the world’s largest coffee-shop operator, gained 45 percent. The S&P 500 was up 22 percent in that time.
“Demand is pretty strong,” said Thomas Mikulski, a senior strategist at Lind-Waldock, a broker in Chicago. “There are no fresh developments on new crops, so that has left the market focusing on current tight supplies.”
Arabica-coffee futures for May delivery gained $4.15, or 1.5 percent, to settle at $2.73 a pound at 2 p.m. on ICE in New York. Earlier, the price reached $2.759, the highest since May 1997.
‘Can’t Drink Enough’
“People just can’t seem to drink enough coffee,” said John Carey, a Boston-based money manager at Pioneer Investments, which oversees about $250 billion.
Surging prices will also boost expenses for retailers. Costs “will get progressively worse,” Thomas Cawley, the chief financial officer of Peet’s Coffee & Tea Inc., said this week.
The International Coffee Organization said global supplies probably will stay around 13 million bags, the lowest since the organization began keeping records in the 1960s.
A bag weighs 60 kilograms (132 pounds).
In London, robusta-coffee futures for May delivery advanced $32, or 1.4 percent, to $2,337 a metric ton.
Arabica is grown mainly in Latin America and brewed by specialty companies including Starbucks. Robusta beans, used in instant coffee, are harvested mostly in Asia and parts of Africa.
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