Euro am Sonntag raw materials: Coffee prices are currently not a real treat: How investors can still win | message
Raw materials in this article
by Emmeran Eder, Euro on Sunday
The coffee market is also affected by the corona epidemic. Apparently, many German consumers hamstered not only toilet paper and French consumers not only red wine, but also coffee. In any case, from mid-March to the beginning of the lockdown, the price of a pound of the high-quality Arabica rose by 25 percent. Europe is the most important sales area for this type of coffee, which dominates the world market.
This partially explains the increase. In addition, the importers in the largest consumer countries increased their stocks significantly in March. On the one hand, they wanted to meet the above-mentioned higher demand in retail, on the other hand, they feared supply interruptions from the important export countries of Brazil and Colombia, where Covid-19 also began to spread.
This briefly overcompensated for the demand, which fell sharply due to the corona-related closure of cafes, restaurants and bars and the absence of many employees from their workplaces. Since the end of March, however, the price of coffee has been falling significantly again. It has fallen by almost 20 percent since then. One explanation of the raw material analysts for this is that after the hamster purchases have subsided, the lower demand due to the lockdown in Europe and now also in the USA finally hit the price.
Good harvest in Colombia
Even if the restaurants open again soon, the consumption of coffee will not return to the old levels as quickly due to the slow start-up of this branch. That should initially stand in the way of an increase in the price of the drink.
But there are other causeswho speak for a lower coffee price. The harvest in Colombia, the fourth largest growing country in the world, was good this season. And the harvest should be even better in the period 2020/21.
Experts are even expecting peak production in Brazil in the coming 2020/21 harvest year. Brazil is by far the most important producer country on earth with a 34 percent share. The state-owned forecasting authority Conab assumes a harvest of around 60 million sacks. That is significantly more than in the previous year.
“We also expect the weakness of the Brazilian real to act as a headwind for coffee prices as the weaker Brazilian currency encourages the country’s producers and traders to offer more coffee to export markets to increase their US dollar earnings” , says Aneeka Gupta, analyst at ETF and ETC provider WisdomTree, which specializes in commodities.
In addition, the International Coffee Organization ICO in a study from 1990 to 2018 found that if global GDP slumped by one percent, global consumption of the drink would decrease by 0.95 percent. All this speaks for further falling prices of the agricultural product.
Bet on falling coffee prices
With the Mini Future Short Certificate (ISIN: DE 000 DD1 PT7 7) from DZ Bank, investors with a leverage of currently 1.7 can benefit from falling Arabica coffee prices. The knock-out barrier at 168 cents per pound is around 54 percent of the current coffee price. However, the paper is only suitable for very risk-tolerant investors.
More coffee price news
Image sources: Andrey Armyagov / Shutterstock.com, iStockphoto