A rising tide lifts all boats, and a glut in the coffee market should lift all your favorite coffee-slinging stocks. Financial Times is reporting that worldwide coffee production will hit a record high for the current crop year, particularly for Arabica, the planet's go-to coffee-bean varietal.
Coffee, tea, or coffee
According to the International Coffee Organization:
- For the 2012-2013 crop year, Arabica production is estimated to hit a record 90 million 60 kilogram bags. This is a 10.6% increase from the previous year. Arabica sets the standard for coffee drinkers everywhere, and is the kind of coffee used in espresso-style drinks.
- This estimate is backed up by Brazil's forecast Arabica-bean output of 37.9 million bags, as well as Colombia's forecast 9 million bag output.
- The estimate for Robusta beans is up, as well, with a forecast 5.1% rise in output, or about 56 million bags total. Robusta is the bean used primarily for instant coffee.
With more supply in the coffee-bean market, commodity prices should drop, which means that your favorite suppliers of black gold -- including Starbucks (NASDAQ:SBUX), Dunkin Brands (NASDAQ:DNKN), McDonald's (NYSE:MCD), and Green Mountain Coffee Roasters (NASDAQ:GMCR)should all gain a little more breathing space on their gross margins.
As this effect trickles down, profit margins should increase, profits should rise, and so should your share prices. So, if you're not currently invested in any of the aforementioned caffeine movers, now might be a good time. Being a socially-responsible investor, my personal favorite is Starbucks, a star performer when it comes to both social responsibility and business performance. But with this bit of news about a glut in the coffee-bean market, frankly, all four are worth a look right now -- Green Mountain, in particular.
With the company as cheap as it's ever been, many investors are wondering whether this is the end of the former market darling, or the perfect entry point for an enormous rebound. Get the Motley Fool's recommendation on Green Mountain in this new premium research report. In it, you'll find everything you need to know about the single-cup slinger, including whether it's a buy at today's prices. Click here for instant access.
Fool contributor John Grgurich owns shares of Starbucks. Follow John's dispatches from the bleeding heart of capitalism on Twitter @TMFGrgurich. The Motley Fool owns shares of McDonald's Corporation. The Fool owns shares of and has written puts on Starbucks. The Fool owns shares of and has Long put on Green Mountain Coffee Roasters. Motley Fool newsletter services have recommended buying shares of Starbucks, Green Mountain Coffee Roasters, and McDonald's Corporation. Motley Fool newsletter services have recommended creating a bear put spread position in Green Mountain Coffee Roasters. Motley Fool newsletter services have recommended creating a bull call spread position in McDonald's Corporation. Motley Fool newsletter services have recommended writing covered calls on Starbucks. The Motley Fool has a delightful disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.