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Did Coffee Just Turn Higher?


  • An ugly bear market since before November 2016.
  • A recovery and then a marginal new low.
  • Consumption is rising.
  • Production is variable, and the Brazilian currency could be bottoming.
  • JO for those who do not trade futures.
  • Looking for more? I update all of my investing ideas and strategies to members of Hecht Commodity Report. Get started today »

This week, the price of coffee traded to a new low at 91.25 cents per pound. While the price was just 0.75 cents lower than the September 2018 low, coffee futures had not traded below the $1 per pound level since 2006 before last August. At the lowest price in a dozen years, the price of coffee was on sale, and this week, the price got even less expensive which is good news for the many consumers around the world and bad news for coffee producers.

Many reasons have contributed to the price weakness in the coffee futures market. The dollar is the reserve currency of the world and the benchmark pricing mechanism for many commodities, and coffee beans are no exception. However, Brazil is the world's leading producer and exporter of Arabica coffee beans, and weakness in their local currency softened the blow of lower dollar-based prices making the move below the $1 per pound level possible. Additionally, the bearish trend in the soft commodity encouraged trend-following traders to sell the commodity short to profit from falling prices.

As coffee futures fell to a new marginal low this week, there are signs that a price recovery could be on the horizon. The most direct route for a trade or investment is via the futures and futures options that trade on the Intercontinental Exchange. For those who do not venture into the future arena, the iPath Series B Bloomberg Coffee Subindex Total Return ETN product (NYSEARCA:JO) provides an alternative.

An ugly bear market since before November 2016

The price of coffee had been a one-way street lower from November 2016 when the price of nearby ICE futures traded to $1.76 which was a lower high on the long-term monthly chart.

Source: CQG

As the monthly chart highlights, the price of coffee

The Hecht Commodity Report is one of the most comprehensive commodities reports available today from the #2 ranked author in both commodities and precious metals. My weekly report covers the market movements of 20 different commodities and provides bullish, bearish and neutral calls; directional trading recommendations, and actionable ideas for traders. I just reworked the report to make it very actionable!

This article was written by

Andrew Hecht profile picture
Weekly commodities commentary and calls, from a Wall Street veteran
Andy Hecht is a sought-after commodity and futures trader, an options expert and analyst. He is the #2 ranked author on Seeking Alpha in both the commodities and precious metals categories. He is also the author of the weekly Hecht Commodity Report on Marketplace - the most comprehensive, deep-dive commodities report available on Seeking Alpha.

Andy spent nearly 35 years on Wall Street, including two decades on the trading desk of Phillip Brothers, which became Salomon Brothers and ultimately part of Citigroup.

Over the past two decades, he has researched, structured and executed some of the largest trades ever made, involving massive quantities of precious metals and bulk commodities.

Andy understands the market in a way many traders can’t imagine. He’s booked vessels, armored cars, and trains to transport and store a broad range of commodities. And he’s worked directly with The United Nations and the legendary trading group Phibro.

Today, Andy remains in close contact with sources around the world and his network of traders.

“I have a vast Rolodex of information in my head… so many bull and bear markets. When something happens, I don’t have to think. I just react. History does tend to repeat itself over and over.”

His friends and mentors include highly regarded energy and precious metals traders, supply line specialists and international shipping companies that give him vast insight into the market.

Andy’s writing and analysis are on many market-based websites including CQG. Andy lectures at colleges and Universities. He also contributes to Traders Magazine. He consults for companies involved in producing and consuming commodities. Andy’s first book How to Make Money with Commodities, published by McGraw-Hill was released in 2013 and has received excellent reviews. Andy held a Series 3 and Series 30 license from the National Futures Association and a collaborator and strategist with hedge funds. Andy is the commodity expert for the website about.com and blogs on his own site dynamiccommodities.com. He is a frequent contributor on Stock News- https://stocknews.com/authors/?author=andrew-hecht

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The author always has positions in commodities markets in futures, options, ETF/ETN products, and commodity equities. These long and short positions tend to change on an intraday basis. The author is long coffee

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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