Coffee Beans to halve

Coffee prices are at historically high extremes.

Across various measures, Coffee is overbought and stretched.

In the chart below, the month of December 2021 shows the contract price of Arabica coffee at 105% above its 200 weekly moving average.

It’s quite uncanny that “105%” has been seen at previous peak moments.

And remember, parabolic moves are often met with a sharp retracement. The price should eventually come back and kiss that 200 week average.

A falling coffee price bodes well for companies such as Nestle and Starbucks. These companies can acquire beans at cheaper levels but not necessarily reduce their retail prices.

They can justify any backlash by citing rising labour or wage costs.

By the way, just like the price of beer, I’ve never seen the price of coffee decline at the retail and premium level.

So, in other words, the price of coffee beans may halve but the price of your coffee beverage will firm.

February 2, 2022

by Rob Zdravevski

rob@karriasset.com.au

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