Record-high U.S. milk prices squeezing Starbucks and other companies

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“I am concerned about dairy, both domestically and around the world, and we are working feverishly with our suppliers.”

Milk prices are record-high but only when compared to prices since 2008. The 2008 record was $3.8 per gallon and the average price for milk in the month of February was $3.56. According to market analysts things are just going to get worse and not only for Starbucks but for everyone in U.S. who will be affected by milk prices variations. Milk demand in U.S. has been in decline for the past 30 years and what makes things worst now is that within the last three years this trend was accelerated. This is really bad news especially for companies like Starbucks that buy a lot of milk.

Businesses that get their milk from E.U. experience difficulties in getting the quantities they want at the price they want. In 2013 both big milk producers from the European Union and New Zealand had production problems due to natural phenomenons: torrential rains in E.U. and drought in New Zealand. Starbucks tries to protect their business against this price risk by entering into commodity hedges.

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