Smaller Supply, Larger Demand Could Energize Coffee ETN

As you sip that cup of morning coffee, did it ever occur that coffee demand may be outpaced by supply, causing the related ETN to get giddy?

World coffee consumption is expected to exceed production from 2009-10, because of smaller crops in Brazil, by as much as 8 million bags, reports Claire Leow for Bloomberg.

Prices of the mild-tasting arabica coffee used by Starbucks Corp. (SBUX) jumped 6.1% on Tuesday, the biggest gain in almost three years. This is a tight situation that will support prices in the long run.

Prices of the bitter-tasting robusta used in espresso and instant coffee by Nestle SA (NSRGY.PK) climbed 4.3%, and output is rumored to drop 22% next year, or 36 million bags.

• iPath Dow Jones AIG Coffee TR Sub-Index ETN (JO) down 24.8% since inception