#Coffee - Consolidation ending $JO #ETN

Record Droughts will bring scarcity & higher prices

El Nino has brought drought to the main regions where coffee is harvested. El Nino is causing massive damage to coffee crops in East and West Africa, Colombia, Brazil, India, Indonesia, Central America, the Caribbean, Peru and latest also in Vietnam where the key coffee region of the Central Highlands has been hit by the worst drought in 90 years.

 

Inventories are almost dried up in producing countries and stocks in importing countries are unchanged from the levels seen five years ago - but 5 years ago the world was consuming more than 15 Mio. 60-kg bags coffee LESS than what is consumed today.

 

Chart 1 shows that the price of coffee has bottomed around year-end in the futures market at around US$ 1.10 and rallied to over US$ 1.50 in July. A consolidation brought the price down to US$ 1.37.

 

The best vehicle to trade coffee prices is through the ETN iPath Bloomberg Coffee Subindex, symbol JO US$ 20.71. The price is just about finishing correcting and the MACD is low and turning up in chart 2).

 

The Point&Figure chart shows the great breakout on the upside at US$ 21 and the check back to the breakout level. Coffee (JO ETN) has made a fantastic bottom formation over a 1-year period and is ready for a further advance. This Point&Figure chart is very powerful (chart 3).