Investing in Coffee: Speculating in Coffee

Investing in Coffee: Speculating in Coffee

Coffee: A large sales market & strong price fluctuations for green coffee

Americans drink coffee every day: from espresso to latte macchiato to cappuccino, all specialties are represented. High time to make an investment.

Investing in coffee – a clever move

The coffee consumption in America is so high that it even makes the mineral water consumption behind. The sales of hot beverages are constantly increasing due to the rapid increase in the number of people on earth. A completely new market is opening up in China: a real boom has developed there. The tea nation is now relying fully on caffeine : the global cult drink is particularly popular with young people in Asia. This is also due to expanding coffee house chains like Starbucks. Anyone who wants to invest in coffee benefits from a large industry.

Coffee beans are grown in more than 50 states, particularly in the equatorial region. Europeans prefer to use Arabica coffee, which is responsible for 70 percent of world production. The cultivation of Arabica coffee takes place on cultivated areas at an altitude between 600 and 1,200 meters. The cultivation areas can only be enlarged in places – the supply remains almost the same. The increasing demand is driving the price of the coffee bean up. The same thing happens when the climatic conditions change. Crop residues resulting from a drought drive the market price of coffee strong up. Since the world population and its prosperity are constantly growing, the price of hot drinks is increasing. It is therefore worth taking a look at the coffee markets of the world, in particular, on the investment potential there. Large corporations like Coca Cola have long since discovered the economic development potential of coffee and have invested billions of dollars. Clever minds imitate this investment strategy.

Investing as a retail investor

If you want to invest in coffee, you have various options . An investment in the good “coffee beans ” is not recommended. After all, coffee beans have a limited shelf life and can only be stored to a limited extent. Clever investors focus on certificates and ETCs that allow them to participate in the price trend for coffee. Coffee is not traded in euros : therefore “currency-adjusted” coffee certificates should be selected. Otherwise, investors are exposed to the risk of currency fluctuations. In order to prevent a total loss, the certificates should only be purchased from large and liquid credit institutions.

We recommend a classic open-end certificate for beginners : The papers are linked to the price development of coffee. The investor makes a bet by betting on rising or falling coffee prices. These are “Call” – and “Put” certificates are available. Investing in coffee is a speculative business : the prices for green coffee can change extremely quickly. Droughts and political crises have an immense impact on the coffee business.

Coffee price fluctuations

The price of coffee has fluctuated many times in the past. In 1994 the Brazilian coffee harvest was almost completely destroyed by a forest. At that time, prices rose by almost 300 percent. In 2001 , favorable climatic conditions led to the opposite price development: the overproduction led to a price reduction of around 30 percent. The largest coffee producers in the world are Vietnam, India, Colombia, Indonesia and Brazil . Coffee price can immensely be influenced by the following: drought, frost and wars. Commodity speculators know this and therefore deal with weather forecasts in the regions concerned. The forecast of severe weather can lead to immense fluctuations in the stock market.

The population growth in Asia will lead to a significantly higher price level in the long term. The acreage cannot be expanded at will, as coffee grows almost exclusively in the equatorial region. The Arabica coffee bean , which is most in demand, can basically only be grown in the mountainous regions of the highlands. The cultivation area is limited by the climatic conditions – this makes a massive expansion of coffee production appear unlikely. Investors therefore benefit from the bright prospects for price increases. The investment in coffee is a long-term investment that could be worth quite.

You might be interested in the following:

Vietnamese Coffee – the New Coffee Trend

Coffee recipes for spring: delicious and refreshing

The tastiest Christmas cookie recipes

Cookies with coffee – delicious recipes

Recipes for cocktails with coffee but without alcohol

Strong distribution of depots is recommended

Although coffee prices should rise in the long term, price fluctuations have to be accepted. Investors should therefore rely on a broad diversification of their portfolio.

Shares allow you to participate in price developments by investing in listed companies. Companies such as Nestlé or Jacobs Douwe Egberts should be mentioned in particular. If you want to invest in coffee in the Asian market, you should concentrate on the Indian Tata Coffee. Anyone targeting futures contracts or exchange-traded products should study them intensively. ETPs (Exchange Traded Products) mimic indices, simulating continuous exposure to coffee. Indices that can be used to invest in coffee futures include the UBS Bloomberg CMCI Coffee, the Dow Jones-UBS Coffee Subindex and the Barclays Capital Commodity Index Coffee.

Conclusion

Investing in coffee is beneficial. Investors should pay attention to a broad diversification of their portfolio and focus on long-term investments .