Coffee has always been one of investor's favorite options for ETFs, but they aren't speaking about Starbucks; they are talking about investing in the commodity. The commodity depends mostly on climate and supply and demand factors, while Starbucks depends on other factors that cannot be foreseen or studied as accurately. The focus of this article concerns investing in coffee, the commodity.
Lately coffee has had a couple of peaks and then it has fallen several times. This is due mostly to uncertainty with the Chinese market, which is growing at double digit rates, annually. The price of coffee has finally settled at 320 and has been there for some time. Now that the market has been defined it may start rising like foam on your favorite Starbucks brew. Improvements in the world economy are giving the middle financial class a breather, which allows them some extra cash and some time to relax.
The Chinese market has multiplied over the past years adding pressure to the market by increasing 10% to 15% every year. In 2006 they were buying 46,000 tons, in 2010 they bought almost 80,000 tons, and they have almost doubled their consumption in five years. Soon they will be the second greatest coffee buyers in the world. This combined with the improvement in the European market points to a rise in prices.
Medium term investment in coffee looks encouraging but the market is not strong enough yet and prices could suddenly change due to weather and climate conditions. Since the ETFs are not leveraged you would be protected from any downfalls due to changes in prices and market.
Weather conditions and harvest levels in Central and South America point towards a steady rise in prices. This added to the increasing consumption in China and the European market where the economy is starting to level off makes coffee a great option once the price levels off and starts to rise. Once it starts to rise it will continue steadily upward pushed by the market.
As always, investors should be cautious. Commodity prices can be volatile, so the best way to invest in commodities is via an ETF. However, not all ETFs are created equal. To find the best ETFs, check for websites that show ETF ratings along with research and analysis to back up those conclusions.
Lately coffee has had a couple of peaks and then it has fallen several times. This is due mostly to uncertainty with the Chinese market, which is growing at double digit rates, annually. The price of coffee has finally settled at 320 and has been there for some time. Now that the market has been defined it may start rising like foam on your favorite Starbucks brew. Improvements in the world economy are giving the middle financial class a breather, which allows them some extra cash and some time to relax.
The Chinese market has multiplied over the past years adding pressure to the market by increasing 10% to 15% every year. In 2006 they were buying 46,000 tons, in 2010 they bought almost 80,000 tons, and they have almost doubled their consumption in five years. Soon they will be the second greatest coffee buyers in the world. This combined with the improvement in the European market points to a rise in prices.
Medium term investment in coffee looks encouraging but the market is not strong enough yet and prices could suddenly change due to weather and climate conditions. Since the ETFs are not leveraged you would be protected from any downfalls due to changes in prices and market.
Weather conditions and harvest levels in Central and South America point towards a steady rise in prices. This added to the increasing consumption in China and the European market where the economy is starting to level off makes coffee a great option once the price levels off and starts to rise. Once it starts to rise it will continue steadily upward pushed by the market.
As always, investors should be cautious. Commodity prices can be volatile, so the best way to invest in commodities is via an ETF. However, not all ETFs are created equal. To find the best ETFs, check for websites that show ETF ratings along with research and analysis to back up those conclusions.
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