The potential is brewing for coffee-related shares and the iPath Dow Jones-UBS Coffee Subindex Total Return ETN (NYSEArca: JO), which jumped nearly 3% Wednesday morning.
The coffee-futures exchange traded note (ETN) was up nearly 15% for the three months ended April 11.
The coffee ETN is on a run along with other commodities, especially after the floods in Australia have created a supply glitch. Adding to the demand is the rise of emerging economies such as India. Jane Shi for 2poin6billion reports that as India’s domestic taste for coffee rises, the path has been set for Starbucks (NYSE: SBUX) to segue. [Behind The Jolt To Sugar and Coffee ETNs.]
As India’s tea drinking is rivaled by coffee, Starbucks has set a course for entry into a young market by partnering with India’s Tata Coffee – the largest coffee plantation in India and parent company of Eight O’Clock Coffee Co. Together the two conglomerates are sourcing premium coffee, with the idea of adding another 5,000 cafés within the next five years in addition to the existing 1,400.[Commodity ETF Roundup: Coffee Buzz and Base Metals.]
Keep in mind that there are an anticipated 1,500 total outlets Starbucks expects to have in operation by the end of this year in China alone. PowerShares Dynamic Leisure and Entertainment (NYSEArca: PEJ) holds 5.5% in Starbucks. Likewise, PowerShares Dynamic Food and Beverage (NYSEArca: PBJ) gives 5.5% to SBUX.
iPath Dow Jones-UBS Coffee
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.