Wednesday, July 14, 2010

Can Coffee Keep Rolling? A Look at Supply/Demand Fundamentals

Coffee's been one of the hottest commodities on the board to date in 2010 (remember, the broader CRB Index peaked in early January) - can everyone's favorite pick-me-up continue it's run?

The supply/demand fundamentals are very intriguing, writes Julian Murdoch for our friends at Hard Assets Investor.  Coffee demand has doubled in the past 10 years (!) - and farmers can barely keep up.  While they have boosted supply, demand has rocketed up faster - as a result, global coffee stocks sit near all-time lows.

You can read Julian's full coffee supply/demand analysis here (with some excellent charts included).

If you're thinking about going long coffee here - be careful.  Coffee is one of the most volatile commodities you'll see, and can produce some truly nauseating volatility for traders (take it from a guy who's been on the coffee beat for a little while - through both good trades and bad!)

I'd prefer to punt on a coffee position if we see another nasty wave of deflation that kicks the prices of everything to the floor once again.  If that happens, coffee might be one of the first to "perk up" (sorry, couldn't resist!) as people start to find jobs once again when we eventually emerge from this Global Depression.

But let's part ways on a cheery note...and revisit everyone's favorite part of waking up.  From a time when America actually went to work, and unemployment was actually falling, here's a blast from the past...

1 comment:

nikki said...

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