Coffee, Rust, ETFs and Where the Price is Headed

An increase in coffee or roya leaf rust in Central America has generated concerns on how it could have an effect on coffee production in the region, as well as the resultant coffee prices that may accompany any possible shortages.

It must be understood that the coffee rust problem is in relationship to Arabica coffee plants and not robusta coffee. Arabica coffee is what is usually offered in coffee stores. Robusta coffee is normally associated with instant coffee, although "premium robusta" can be found in specialty espresso blends at retail outlets. In this article, the primary focus will be on arabica coffee.

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Cocoa Drops While Coffee Rises

Cocoa and Coffee prices

Cocoa and coffee prices moved in opposite directions as events outside demand drove cocoa prices down and coffee prices up to end the week.

Most of the commodity price movement was in relationship to the strengthening of the U.S. dollar against the euro, which seems to motivated some commodity investors to hold back on commodities in the latter part of the week.

Cocoa future prices for may dropped a little, while coffee prices moved in the opposite direction, for the first weekly gain in about a month.

Cocoa prices are expected to resume their upward climb based on demand in the near future.

Cocoa and coffee prices

Coffee Production Mixed in 2010

Coffee Prices Going Up?

Coffee may have one of those up and down years depending on what story you're reading or listening to.

When taking into account quality coffee, there are real concerns there will be a shortfall for the rest of 2010, possibly putting upwards pressure on the prices.

Particular problems seem to be coming form Colombia where the crop is expected to be smaller than last year, and there is also the insect problem causing production problems as well.

Overall, the real story for coffee could be over the next decade, where estimates are supply of coffee could plunge by over 30 million bags because of strong demand and the need of investment of plantations, which take time to produce from scratch.

Coffee Prices Going Up?

Commodities: East African Coffee, Tea

East African countries could be the strong beneficiaries of commodities like coffee and tea, which are enjoying a surge in prices as commodities as an overall class increase in price too.

Other commodities set to help the East African region are gold and other base metals such as copper, lead and zinc, as Europe, China and India buys up its raw materials and agricultural products.

Some of this has come from stimulus programs devised to work on the infrastructure of these countries, which of course generates strong demand for precious metals and other raw materials.

Because tea and coffee is a major part of all the economies of the East Africa region, it is expected that they, more than the other commodities, will be the most beneficial to them at this time.

Demand from emerging markets also guarantee commodity demand and prices over the next couple of years will help countries like Tanzania, Uganda and Kenya.

Commodities: Cocoa Holding Up Well

While commodities continue to get battered, cocoa is performing stongly for the group, actually growing by 15 percent for the year, standing at about $2,372 a metric ton.

So far chocolate sales this year have been decent, but like everything else, much depends on the economy as to whether that will continue.

A major concern in this area is dark chocolate, which uses more cocoa than its milk chocolate cousin.

The good news is cocoa-related chocolate is a comfort food, and historically during times like these - along with coffee - have grown in usage.

There's always a bright side for specific commodities, as demand for some over others will always be part of human desire.

Commodities: Vietnamese Coffee Harvest

Vietnam coffee prices down as rains hinder commodity from being harvested

Supply of coffee from Vietnam has been hampered as rain continues to keep farmers from harvesting their crop. Rains in the Central Highlands ares has specifically hindered the harvest.

Although the coffee harvesting began about two weeks earlier than normal, starting on October 20, farmers haven't been able get to their fields to start the bean-drying process. The cloudy weather has also kept land from drying quicker as well.

Even so, another factor is the price of coffee, which has pressured prices downward, and Vietnamese farmers are probably in no hurry to get back in the fields either, hoping the demand will drive prices up more.

"This demand has put pressure on Vietnamese prices but given the supply of fresh beans remains thin, the market has not stirred much," said a trader in Ho Chi Minh City, Vietnam’s main coffee trading market, in reference to shipment from Indonesia being delayed after the sharp drop in prices. About 30,000 tons of coffee beans could be defaulted on, driving buyers to the Vietnamese market.

Bids for the week have come in at between $140 to $190 a ton, while contracts for January ranged from $160 to $175.

Vietnam is only behind Brazil worldwide in producing coffee beans.

Hopefully the commodity problems will be solved so farmers can have a successful year.

Coffee Exception to Commodities Weakness

While most commodities have been plunging in price, coffee has remained strong, and has grown in August's producer price index basket by 12.6 percent on a month-to-month basis.

According to the International Coffee Organization, the jump in August prices was significantly influenced by the hurricanes' impact om coffee plantations in important Caribbean areas.

The ICO added that coffee is primarily moving on supply-and-demand factors, and speculation plays little role in the existing price moves.

In other coffee news Brazil should end up with a record crop this year, although it's not clear at this time whether that will result in higher exports, as Brazilian demand for coffee is high internally.