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: 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.

Commodity Surge Here Again

It looks like the commodity market is done taking a breather, and it's on the way again, as not only agricultural products went up in significant amounts, but a number of metals increased along with them.

After the hit commodities took last week, the usual number of the uninformed called the end to the sector: how wrong they were!

Of course this doesn't mean we're going to on huge surges all the time, but I do think overall, we'll see a steady climb in the overall sector, with the occasional dip. Of course it all depends on the individual commodity and its performance, but overall this trend should continue on for some time.

Both corn and soybeans gained the allowable amount on the Chicago Board of Trade. Others like cocoa also had significant increases, with cocoa growing by 6 percent and coffee by 3 percent in New York.

Upheavals in Argentina, with farmers striking ports, caused concerns on what would get out of the country, as well as wet weather conditions in the eastern part of the midwest have slowed down planting dates for corn. It finished at $5.44-3/4 a bushel for the May contract today.

Soybeans also hit their limit for the second straight day, as it reached $13.07 a bushel for May SK8, when hitting its 50-cent limit. Most other contract months on the CBOT hit their limits as well.

Wheat responded to the agriculture rally, as its May WK8 contract closed at $10.67-1/2 a bushel, an increase of 47-1/2 cents.

The rally in corn and soybeans also lifted CBOT wheat for May WK8, which closed up 47-1/2 cents at $10.67-1/2 per bushel.

Light crude in the U.S. increased to $101.22 a barrel, moving up 36 cents. Its cousin across the pond, London Brent Crude surged by 74 cents, to reach 100.60 a barrel.

Others that enjoyed surges were gold, copper and U.S. crude oil.

How High Will Commodities Go? News around the Web

The continuing "commodity surge" this week shows there's no end in sight for how high things will go. Many currencies reached new highs against the U.S. dollar, and oil and gold also reached levels never achieved before.

Ongoing concerns about recession will keep investors interested in commodities, as well as other concerns of stagflation, inflation, weakness of the U.S. dollar, and the crisis in the banking system.

Here's the commodity news from around the web:

Record euro, commodities driven by fears of inflation

Record highs for the euro, oil, gold and a host of commodities are both cause and consequence of inflation as investors seek a safe haven from an economic storm sparked by the collapse of the US property market, analysts said Friday.

They said the main concern for investors was stagflation, which occurs when when inflation rises even as growth slows in the worst possible economic combination and was the blight of the 1970s.

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Commodities boom to keep breakfast hot for a while

The commodities boom has a long way to run because demand is outstripping supply, with panicking investors snapping up gold and Asian appetites driving up the cost of the world's breakfasts, Schroders commodities product manager Christopher Wyke said on Friday.

With financial markets quaking at the prospect of a U.S. recession, investors are flocking to gold , which has hit repeated record highs and is approaching $1,000 an ounce.

"We think gold prices will continue to rise sharply in 2008," Wyke told a briefing in Hong Kong.

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Commodities Wrap: Coffee and Beef

Coffee Costs Force Price Increase, Beef Acquisition Raises Hopes for Better Profits

It was a week of mixed messages for food makers, as commodity costs forced one company to raise prices for the first time since 2005 and an acquisition in the beef sector raised hopes for better profits.

Green Mountain Coffee Roasters Inc. said Wednesday it would have to raise its prices by 8 percent to 12 percent on average across all of the coffee products sold in the Green Mountain coffee division, on orders placed on or after May 5. The price increase will affect both its Green Mountain packaged coffees as well as its K-Cup single-portion packs.

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U.S. equities, employment, Canadian dollar, Fed, commodities


U.S. equity index futures are lower in pre-opening trade. Dow futures are down 130 points. Traders were disappointed with the February employment report. Consensus for February Non-farm payrolls was an increase of 20,000. Actual was a decline of 63,000. Consensus for the February unemployment rate was 5.0%. Actual was 4.8%. However, the drop was attributed to a decline in the number of people who are seeking employment.

The U.S. employment report triggered additional weakness in the U.S. Dollar and strength in the Canadian Dollar and Euro. The Canadian Dollar also was buoyed by news that Canada added another 44,000 jobs in February. The Canadian dollar is up 0.80 in pre-opening trade.

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Fisher Says Commodities Make Reading Inflation Harder

Federal Reserve Bank of Dallas President Richard W. Fisher said ``persistent'' increases in commodity prices make it harder for central bankers to determine precisely how much inflation may be rising.

``The fact that these increases have been persistent and not quickly reversed has raised tough questions about traditional measures of core inflation,'' Fisher said in the text of a speech today in Paris. That's also ``made it increasingly difficult for central bankers to separate signal from noise in the inflation data.''

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Commodities zoom, but could crash and burn


One sure way to lose money as an investor is to buy something strictly because it keeps going up.

Now, analysts are warning investors not to become carried away with commodities. Although gold, oil, metals and agricultural commodities have been breaking records and enriching investors while the stock market has been a loser, many analysts are growing skeptical.

“The price trend in wheat, oil and gold appears to be similar to the ones seen in the late 1990s for the Nasdaq, and in the mid-2000s for home builders,” Citigroup strategist Tobias Levkovich said last week.

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Rush to commodities not over, analysts say

Investors have turned from risky securities in recent months literally to bread and butter investments, namely raw commodities, such as metals, grains and oil.

But, analysts wonder when the bubble will burst. The run on commodities in world markets is probably not over, analysts told Friday's Science Christian Monitor.

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