Brad Zigler

Coffee Sweeter than Sugar

Milk prices have actually been ratcheting down (some 26%) since peaking in late March.

We track the wholesale trend in milk, and seven other common breakfast items, in Hard Assets Investors' monthly Breakfast Index (published coincidentially with the Consumer Price Index report; see our last iteration, "CPI At Breakfast: Coffee Talk" at www.hardassetsinvestor...).

Don't Bale on Cotton (Yet); Got Coffee?

Seasonal traders tend to looking for a series of relatively low-risk plays. History seems to indicate that July cotton's best odds for gains is in the first half of May.

Hang on after that is more a crap shoot.


On May 11 11:30 AM Brett Owens wrote:

> Hey Brad - great call on cotton. So do you think it can continue
> it's rally past this week, or are you looking to book profits soon?

Don't Bale on Cotton (Yet); Got Coffee?

Cotton didn't start its uptrend until March, so a year-to-date comparison may not reflect the way people actually trade futures. After all, YOU don't automatically put on new trades at the top of the year, do you?

In the second quarter, cotton has actually outperformed sugar.

But, let's make a distinction between a seasonal trade and a secular play. Seasonal trades are percentage shots, limited in duration and scope. A secular trade is called for when fundamentals align in such a way as to indicate a long-term tipping in the supply/demand balance.

If you came to the cotton trade late, there's still a good probability of capturing some upward volaility from the seasonality in the July contract.

Postpone demand? You mean Coca-Cola is a STAPLE?

On May 11 09:08 AM gva1203 wrote:

> sugar is the best return in ag futures this year, just over 25% ytd
> as of last Friday. Plus the story behind sugar (world S&D deficit
> over 10m/ton) is more interesting than cotton, after all people can
> always use an old pair of jeans and postpone demand, whereas fizzy
> drink bottlers will not stop procuring sugar to feed mini-markets...
> my advice is to buy V9, it's in correction mode this week and perhaps
> you pick it up at 15.50cts today, the upside potential is about 300pts
> (as per some comm trading houses)

Coffee from the ETN Perspective

The current market for JO displays a spread of only 28 basis points (0.28%), nowhere near the 5%-10% distance you cite.

The liquidity index for JO is $76,705, meaning you'd have to swing a trade of 2,005 shares--at current prices--to move the market 1%.

JO might not be the most liquid of securities, but for someone precluded from using futures (such as owners of tax-deferred accounts such as IRA's, 401(k)'s and 403(b)'s, the ETN may be a practical alternative.

On Jan 30 08:17 AM ROLEX18K wrote:

> IPATH DJ-AIG COFFEE(PCX: seekingalpha.com/symbo...) have
> 3 month average volume of $100,000 a day, while KC (coffee futures)
> have average 100 days trading volume of 675,000,000$ a day.
> For a very small investor, who invests 1000-5000$ in JO this may
> be appropriate, but not for serious investor who want to trade coffee
> or who wants liquidity.
> JO has volume of 2000-3000 shares at the price around 40$, bid/ask
> spread is sometimes 5-10%. It is cearly not for everybody, but if
> you believe in coffee and want to buy JO, then you have to buy and
> forget about it, as even if it will go up 10% you will be only even
> because of bid/ask difference.
> This is very illiquid ETN with only 50,000 shares outstanding (2
> million USD) and have expense ratio excluding crazy bid/ask difference,
> of 0.75%.
> Really not for everybody, even if Coffee I believe is a good investment.