Brazil Drought? Well, coffee bulls have not reacted as if there
is a drought. U.S.
have continued to move lower for last two sessions, sending prices
to a five week low.
[caption id="attachment_62113" align="alignright" width="300"]
Coffee tree beans[/caption]
Arabica coffee dropped 1.10% today, pushing prices to the April
4th low, the lowest price per pound before the start of the April
23rd (a 26 month high) bull run fueled on fears of supply and
demand being lopsided where producers wanted to capture the high
So why the drop in price?
Supply and demand. When prices were climbing, coffee roasters
(producers) look to take advantage of up selling the consumer. We
can see this effect in January - April 15% increase in Brazil's
exports vs. the same window last year. Now that the
producers have taken in all the unroasted coffee beans they can
handle, demand has begun to drop off and it's showing in the price
So where is the price heading?
Here's where it gets interesting. The increase export demand was
met with existing inventory. What you have to realize is the
coffee bean picking season did not start until April. We may
very well see another lopsided supply and demand due to the drought
It's time to put coffee on your watch list. I personally only
play the coffee market through the ETF/ETN vehicles.
iPath Dow Jones-AIG Coffee Total Return (JO)
iPath Pure Beta Coffee (CAFE)