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How to Trade Rising Coffee Prices: Strategists

Your morning cup of coffee may cost you more money going forward. Coffee futureshave jumped more than 40 percent in the last year and there are expectations of a smaller than normal crop next year. So how should investors trade the commodity?

Matthew DiFrisco, executive director and senior analyst at Oppenheimer and James Corider, founder at OptionSellers.comshared their insights.

“I’d buy coffee—coffee is trading at $205 a pound right now and there’s a great chance it may trade up to $250 next year,” Corider told CNBC Monday.

Corider added that as the economy improves, consumers will likely start drinking a higher quality of coffee and the highest quality beans are in “very tight” supply.

On the equity front, DiFrisco has an “outperform” rating on Starbucks and has a $35 price target on the coffee chain.

“Starbucks has been one of the better performers in the restaurant sector although their higher coffee prices work against it,” said DiFrisco. “They have topline trends that people are going to invest on rather than the near-term cost outlook only,” he added.

In addition, DiFrisco has “market perform” ratings on McDonald’s and Peet’s Coffee .

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Scorecard—What They Said:

  • Cordier's Previous Appearance on CNBC (Oct. 1, 2010)
  • DiFrisco's Previous Appearance on CNBC (Jul. 23, 2010)

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More Market Intelligence:

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CNBC Data Pages:

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CNBC Slideshows:

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Other Coffee Giants:

Green Mountain Coffee Roasters

Farmer Brothers

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Disclosures:

DiFrisco’s firm Oppenheimer makes a market in the securities of SBUX and PEET. DiFrisco does not own shares of MCD.

No immediate information was available for Corider or his firm.

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Disclaimer