Starbucks Gets a Coffee-Bean Buzz From Slumping Brazilian Real

  • Arabica beans down 27% in year, boosting company's bottom line
  • Rabobank predicts more commodity price volatility ahead

Here’s something to consider on this National Coffee Day: Starbucks Corp. is the eighth-best performer on the Standard & Poor’s 500 Index so far this year, thanks at least in part to the Brazilian real.

The company has been paying progressively less for arabica, the premium coffee-bean variety. While shares of Seattle-based Starbucks are up 35 percent in 2015, arabica is down 27 percent, the second-worst performer on the Bloomberg Commodity Index.

Coffee prices are being dragged lower by a weaker Brazilian currency that incentivizes export sales from the world’s top supplier. The real and arabica are very closely linked, according to Ross Colbert, a beverage strategist at Rabobank International.

“The Brazilian situation is going to take a year or two to be resolved, so there’s going to be continued volatility in prices,” he said.

Coffee beans are the largest cost input at Starbucks and so there tends to be an inverse correlation between the stock and the commodity price, said Sara H. Senatore, an analyst at Sanford C. Bernstein & Co. In July, Starbucks posted fiscal third-quarter net income of 41 cents a share, up from 34 cents a year earlier.

Still, there remain upside risks for coffee prices. Arabica futures rose 1.4 percent Tuesday in New York after Brazil cut its crop forecast following adverse weather conditions.

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