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Coffee stocks: environmental pressures mount on growers and sellers alike

Posted
6/3/2014 10:32:00 AM
By: Kapitall
Referenced Stocks:

By Ben Levine for Kapitall.

We all love our coffee, and the proof is in the pudding: these little beans constitute one of the most important commodities in international trade.

Yet, a dangerous threat to coffee production has appeared in some of the top coffee-producing countries in Central America-the area of the world where most coffee is grown-like the Dominican Republic, Honduras and Guatemala. 

A fungal parasite called Hemileia vastatrix, more commonly known as "coffee rust," has been ravaging coffee crops in these countries. In the 2012-13 crop year alone it was responsible for just shy of $500 million in value losses and over 370,000 job losses .

The parasite appears as yellow splotches on the leaves of the plant and corrupts those areas' ability to perform photosynthesis, damaging or killing plants. For the 2013-14 crop year, the International Coffee Organization predicted that losses could range from 20% to a whopping 50% of production, and it has considered increasing pesticide-use as a means to reduce these losses.

As if this weren't enough, meteorologists have announced that the likelihood of an El Niño weather event this summer exceeds 65%. El Niño events often lead to excessive rains in the Pacific Basin, which can be harmful to crops like coffee.

While large coffee companies like Starbucks ( SBUX ) will often counterbalance such events by buying supplemental coffee in advance, smaller publicly traded roasters and distributors don't always have these opportunities, particularly at what appears to be the end of this winter's coffee glut

With El Niño looming ahead in the midst of the coffee rust plaguing top producing areas, the industry could take a hit, but such a popular world industry isn't likely to take such losses without a fight. Interested in deciding for yourself? Use the list below to make your own analysis, and let us know what you think.

Click on the interactive chart to view data over time. 

1. Farmer Brothers Co. ( FARM , Earnings , Analysts , Financials ): Engages in the manufacture, wholesale, and distribution of coffee, tea, and culinary products in the United States. Market cap at $314.95M, most recent closing price at $19.82.

2. Green Mountain Coffee Roasters Inc. ( GMCR , Earnings , Analysts , Financials ): Engages in the specialty coffee and coffee maker business. Market cap at $18.56B, most recent closing price at $112.78.

3. Starbucks Corporation ( SBUX , Earnings , Analysts , Financials ): Operates approximately 16,858 stores, including 8,833 company-operated stores and 8,025 licensed stores. Market cap at $55.69B, most recent closing price at $73.22.

(List compiled by Ben Levine. Monthly returns sourced from Zacks Investment Research, all other data sourced from Finviz.)

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