Coffee stocks have made considerable gains during the last few trading sessions as the prices of coffee have surged to a seven-year high after freezing weather conditions in Brazil fuelled fears of a global shortage.
The country has been experiencing severe frosts in its coffee belt over the past week which stoked fears of lower coffee production and the subsequent increase in coffee prices.
Shares of Tata Coffee rose 4 per cent to hit an all-time high of Rs 225.6 on BSE. The stock opened 1.8 per cent higher at Rs 220 against the previous close of Rs 215.95. Market cap of the firm rose to Rs 4,178.05 crore on BSE. It has gained 174 per cent in the last one year and risen 114 per cent since the beginning of this year.
Similarly, CCL Products stock also hit an all-time high of Rs 445.75 on BSE. Market cap of the firm rose to Rs 5,905.11. The share stands higher than 5 day, 10 day, 20 day, 50 day, 100 day, and 200-day moving averages.
The surge in prices is likely to affect coffee enthusiasts all over the world as roasters and supermarkets such as Germany's Tchibo and Japan's UCC have already begun to raise rates.
Weather forecasts for Brazil have predicted that another frost will hit the nation next week. Coffee traders in the country are bracing for further price volatility. They explained that even a small temperature variation could cause a big difference in the level of damage done to trees.
According to MarketsMojo, the technical trend for Tata Coffee has improved from Mildly Bullish on July 26, 2021, and the stock is technically in a Bullish range now. Multiple factors for the stock are Bullish like MACD, Bollinger Band, KST, DOW and OBV.
However, it noted that the institutional investors have decreased their stake by 0.82% over the previous quarter and collectively hold 5.25% of the company.
For CCL Products, it noted that the company has a strong ability to service debt as it has a low Debt to EBITDA ratio of 1.01 times and the valuation seems to be attractive.
Also, the technical trend has improved from Mildly Bullish on May 11, 2021, and the stock is technically in a Bullish range now, and has generated a 39 per cent return since then. Multiple factors for the stock are Bullish like MACD, Bollinger Band, KST, DOW and OBV.
Traders have explained that the frost this year has been more severe than originally anticipated. Many areas in Brazil are seeing temperatures drop to below zero degrees celsius. In the worst affected regions, the temperatures have gone even further down to minus five degrees celsius.
The New York futures price for Brazil's higher quality coffee bean - arabica - jumped above $2 per pound on the back of a sharp fall in temperatures in Brazil's largest coffee-producing regions - Parana, Sao Paulo and Minas Gerais. The last time, coffee prices were this high was in October 2018.
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