Faber's outlook on coffee in this week's Barron's: Q: What is the outlook for other commodities? Faber: Many commodities had big moves in the past two years, but the soft commodities, such as coffee, sugar and orange juice, remain extremely depressed. The price of coffee has been so low that planters have cut the coffee trees and switched to soybeans. The Chinese will drink more coffee in future. If China on a per capita basis started consuming as much coffee as Taiwan and South Korea, they would take up the entire world production. A natural disaster could also push up prices. Coffee is now selling for 68 cents a pound. The high was $3.40 in 1977. It's been a bear market since then. Sometime in the next three years, the price could easily triple. I haven't found a suitable coffee-plantation company. You have to buy coffee in the futures market. Or store five tons in your kitchen.
would not have expected such from a smart investor like Faber Coffee is now selling for 68 cents a pound. The high was $3.40 in 1977. It's been a bear market since then. he forgot to mention the spikes in the 80's and 90's which took coffee futures to those levels
Hi SethArb, I'm still new to commodities. Pl tell me why coffee futures spiked up in the 80s and 90s. Thank you.
Weather can destroy coffee crops. Remember, Brazil coffee crops account for 20% of the world's coffee. 1975 = Frost 1984 = Drought 1994 = Frost
Thanks a bundle for the info waggie945. I'm still poring over my CRB Yearbook 2003 to try to understand what makes these various commodity markets tick. Guess I should glue my eyeballs to CNN's weather updates from now on.
Yo Waggie, I'm waiting to get in. So far, I called the low at 60ish cents. When I look at a monthly chart, I like to wait for the first big move higher to show that we are in a breakout, then I buy the dip. I think that it is possible that we will come off big in the next two-three weeks in coffee, then I'm a buyer. Right now, I'm just loading the boat on a ton of these Canadian junior gold mining stocks. At this point, I think gold is in the breakout. I'll buy these gold stocks at 0.25 CAD and below. If these stocks take a hit, guess what? I'm buying way more!!! If they go to 0.05 CAD, I'm going to join the ranks of Noah and build an Arc to load all of my gold stocks into. Let the flood begin!!!
I like coffee too, as a long-term bull play. The main thing I don't like is the cost of carry. So buying a good coffee growing/plantation stock would be ideal. Bearing in mind the dictum that you shouldn't trade anything you can eat or drink for breakfast, I have not drunk a cup of coffee since last November. Let's hope I don't lose too much weight when I start putting on my corn and wheat positions I agree with Faber about the softs. But I always wait for technical signs that the prior bear market is over. I want to see higher lows and higher highs before I consider getting in. Sugar and orange juice haven't followed this pattern yet.
Coffee is the only soft on the NYBOT that I like right now. Sugar and Cocoa still look like poo to me.