Commodity ETF Alert January 2014 Issue

 

Commodity Outlook:  Coffee

No doubt about it, coffee was one of the worst performing commodities in 2013.  In fact, at one point the savory bean fell to $1.01 a pound- the lowest price point in five years.

At that recent multi-year low, it’s fair to say coffee was a completely unloved commodity- at least from an investment standpoint.

But much to investors’ surprise, the supply/demand fundamentals for this commodity are changing rapidly…

You see, investors have been pricing in lofty production estimates from the world’s leading coffee producers over the past few months.  Brazil, Vietnam, and Indonesia were all forecast to produce record breaking crops as little as two months ago.

That’s precisely why coffee fell in such a dramatic fashion this past October.

But then Mother Nature got involved…

The world’s number one producer of Arabica beans, Brazil, was bombarded with the heaviest rains in over 90 years this past December.  It rained so much that industry experts are warning of rapidly growing odds of a “surprise” global coffee deficit this year.

Folks, robust global production has sent coffee down to price levels many investors thought was unattainable.

And now, with the sudden possibility of a supply shortfall, bullish investors are going to rush into this market.

I’ll cover more on this abrupt change in the outlook for coffee in our monthly update.

For now, just focus on getting into the iPath Pure Beta Coffee ETN (CAFE).

As you may be aware, CAFE is a relatively new way to play the coffee market.  Unlike the iPath DJ-UBS Coffee ETN (JO), which has been around since 2008, CAFE was launched in 2011.  CAFE offers a slightly more affordable way to capitalize on additional price gains for coffee.

No doubt about it, this is one of the best times in years to get long the coffee market!

Technically Speaking:

As you can see, CAFE is percolating higher in recent trading.  The sudden supply uncertainty created by the Brazilian deluge opens the possibility of a continued bullish run.

WHAT TO DO NOW:

iPath Pure Beta Coffee ETN (CAFE) is trading at $15.83
Buy CAFE up to $16.00 per share
Our profit target is $21.00 or more

 

Category: Commodity Trading