Coffee prices hit multi-year highs in 2021. In August, the commodity recorded the 10th consecutive month of surge, mainly due to concerns about weather-related supply constraints and pandemic-triggered freight cost increases.
According to the International Coffee Organisation:
“The level reached in August 2021 represented an increase of 51.3% since the start of the current coffee year.”
A ninth-century Ethiopian herder allegedly discovered coffee, thanks to his goats becoming over-energetic after eating berries from a particular tree. As one of the most traded commodities worldwide, coffee is cultivated in more than 70 countries.
There are four main coffee types: Arabica, which gets the most attention, Robusta, Excelsa and Liberica. Brazil leads coffee production with more than 30% of the world’s cultivation, most of which is Arabica coffee.
Vietnam, Columbia, Indonesia and Ethiopia follow Brazil, together producing around 75% of the world’s coffee. China, India, the U.S. and Indonesia have the highest coffee consumption worldwide.
As consumers enjoy their daily cups of joe, markets pay close attention to coffee prices, which can be unpredictable due to fluctuations in production, freight costs or geopolitical developments. For instance, in late July, coffee prices skyrocketed due to an unexpected frost in Brazil.
Despite the challenges in the industry, trading opportunities still remain strong. Interested readers could invest in the coffee industry through coffee-related stocks in the consumer discretionary and consumer staples sectors, coffee futures or an exchange-traded note (ETN). Let’s take a closer look.
iPath Series B Bloomberg Coffee Subindex Total Return ETN
Current Price: $51.34
52-Week Range: $30.89 – $58.50
Expense Ratio: 0.45% per year
This is an ETN issued by Barclays. We previously covered various characteristics of ETNs, like the counter-party risk of its issuer, i.e. Barclays in this case.