Coffee Prices Rising Again…

| August 29, 2014 | 0 Comments

Don’t look now, but the price of your morning cup of Joe is about to jump…

Coffee prices are rising to the $2 a pound level this week as Brazilian harvest reports reveal the early year drought did ample damage to the delicate trees.  As you may remember, the commodity surged 82% earlier this year on initial Brazilian drought reports. 

Of course, the coffee rally cooled in May and June as investors waited to see if the dry weather really did as much damage as some analysts were suggesting.

Well, the verdict is in…

With the country suffering the worst drought in decades, Brazil’s National Coffee Council sees their harvest dropping to 40 million bags this year- a hefty 18% drop from last year.

While that’s bullish news in itself, the real kicker is the ongoing drought could drastically hamper the 2015 harvest as well.  

You see, recently harvested trees need rain to stimulate blossoms, which ultimately leads to next year’s crop.  The problem lies in the fact meteorologists see key Brazilian coffee growing regions receiving far less rain than they’re accustomed to in coming months.

If Brazil doesn’t get rain soon, it could be a disaster for the country’s coffee growers…

Remember, Brazil is the world’s #1 coffee producer, supplying over half of the global Arabica coffee supply.  Thanks to the drought, the International Coffee Organization (ICO) believes global production will fall short of demand next year.

But get this…

Not only could there be a shortage next year, the ICO thinks it may be the biggest one in a decade.

Look at what the news is doing to the coffee market…


As you can see, the commodity is up 25% from the $1.60 swing low set in mid-July.  Given the dire projections from the ICO, I wouldn’t be one bit surprised to see coffee surpass the $2.19 high set in late April.

And listen to this….

If Brazil doesn’t get ample rain before the next harvest season, it’s not out of the realm of possibility to see coffee jump to $3.  Long-time coffee market watchers realize that price level is the multi-year high set in early 2011.  It’s also 50% higher than current prices.

How can you capitalize on percolating coffee prices?

The easiest way to do it is with the iPath Pure Beta Coffee ETN (CAFE) or the iPath DJ-UBS Coffee (JO).  Both these ETFs track coffee futures.

But it you’re thinking of buying CAFE, just realize one thing…

Subscribers to my flagship commodity ETF investing service, the Commodity ETF Alert, were told to buy CAFE in the May/June pullback. 

Now that coffee is rallying higher, CAFE is beyond my service’s maximum buy price.  That means subscribers can sit back and enjoy the fireworks that will likely consume the coffee market soon.

If you’d like to get into commodities before they make their move, discover what the Commodity ETF Alert has to offer.

Until Next Time,

Justin Bennett

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Category: Commodities

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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