Mmmm, Coffee

Nearly a year ago, I called a 50% decline in the price of Coffee (Arabica Beans)

While that view was formed and based on a few factors, in that note, I shared a chart denoting the ‘extreme’ percentages that Coffee was trading above its 200 week moving average.

Back then, early February 2022, Coffee was trading at $2.60. 

To be particular, my call was for the price of Coffee to trade back down to it 200 week moving average.

Today, it is trading at $1.52 which is right on its 200 week moving average.

Then 2 months ago, I provided an update about this trade

That original note was designed to suggest that the price of Coffee had no business being up in that stratosphere, while it also hinted and translates into some other points;

a) buyers/importers of coffee should consider taking a chance and not locking in future delivery at those high prices, 

b) it was a terrific time for coffee farmers to sell their wares,

c) companies such as Nestle and Starbucks would have experienced some margin compression,

d) speculators should be selling and,

e) other speculators may consider ‘shorting’ Coffee.

Today, these messages can start to be reversed.

And now….

So mean reversion is complete, however my work suggests reasonable enough probability of lower prices ahead, putting my more heavier accumulation somewhere between $1.10 – $1.23.

Incidentally, the recent intra-day low seen was $1.42.

Albeit my strategy is to nibble at the position (with a lower percentage allocation) at current prices, I will wait for my signals and lower prices, before increasing the size of the allocation.

January 17, 2023

by Rob Zdravevski

Coffee’s decline been brewing a while

On February 2, 2022, I wrote that I expect the price of coffee to halve and I made reference of it ‘kissing’ its 200 week moving average.

Today. it is nearly there.

To be particular, its only 6% away.

Keep in mind that this is close enough and if/when it does touch its weekly oversold reading, it doesn’t stay there for too long.

p.s. show this chart to your local coffee shop and ask them why you’re paying 20% more for a cup than last year?

In the original note, I wrote, “By the way, just like the price of beer, I’ve never seen the price of coffee decline at the retail and premium level.

So, in other words, the price of coffee beans may halve but the price of your coffee beverage will firm.”

In all seriousness, your local coffee shop has plenty of other costs to provide reason behind higher prices.

For coffee buyers, importers and roasters….buying time is about now.

November 16, 2022

by Rob Zdravevski

Commodities are peaking

The Thomson Reuters (core commodity) CRB Index hits its highest level since November 2014.

Weightings are particularly heavy towards energy and agricultural contracts.

The CRB is a whisker away from the target mentioned in this story written a few days ago, while the AUDUSD has hit my target of 0.7135.

This is part of my call of a peak for broader commodity prices.

Just take a look around the prices of Oil, Gasoline, Heating Oil, Corn, Wheat, Coffee, Cattle, Oats etc etc.

Also, the price action in Crude Oil is suggesting the recent run is waning.


In turn, I am not owning any related equities across Oil & Gas, Bulk producers of grains and even miners of raw industrial/base metals.

It’s as good as it’s going to get for in this current wave.

So, what else to do…..

Well, I’ll wait…..

then I’ll watch the stock prices of companies who buy these raw commodities such as Kellogg, Starbucks, Kraft Heinz, Nestle, Nucor or Nippon Steel, as their input costs will fall, thus improving their margins.

…….also, the unloved precious metals are worthy of some attention, while the AUD/USD isn’t acting very constructively.

To many, it might seem perverse to Buy USD (and sell your AUD 0.7130) but that is what the market is telling me.

I’m also seeing divergences in currency correlations.

Take a look at the chart below showing the AUDUSD laid over the CRB Index and then the other is the price of BHP over the same currency cross.

I believe currency before I believe the equity.

For extra kicks, I’ve thrown a chart showing the price of Woodside Energy mimicking the CRB Index.

February 3, 2022

by Rob Zdravevski

Coffee Beans to halve

Coffee prices are at historically high extremes.

Across various measures, Coffee is overbought and stretched.

In the chart below, the month of December 2021 shows the contract price of Arabica coffee at 105% above its 200 weekly moving average.

It’s quite uncanny that “105%” has been seen at previous peak moments.

And remember, parabolic moves are often met with a sharp retracement. The price should eventually come back and kiss that 200 week average.

A falling coffee price bodes well for companies such as Nestle and Starbucks. These companies can acquire beans at cheaper levels but not necessarily reduce their retail prices.

They can justify any backlash by citing rising labour or wage costs.

By the way, just like the price of beer, I’ve never seen the price of coffee decline at the retail and premium level.

So, in other words, the price of coffee beans may halve but the price of your coffee beverage will firm.

February 2, 2022

by Rob Zdravevski

Coffee filled the gap

Hello coffee lovers !

On Friday night, 2nd chance to buy coffee at $1.05 happened.

Arabica Coffee futures traded to $1.0490.

Will keep you posted how it turns out.

Rule # 1: Be sure to roll over your futures contract otherwise you’ll need a lot of room if you accidentally take physical delivery.

2nd chance to buy coffee

Coffee didn’t quite trade down to the $1.06 buy price I was looking for, as per my July 31, 2020 note. (see link below)

Instead, it carried on higher from the $1.15 level mentioned, towards a $1.34 high.

The chart below shows a trend line it hugged and held, until it didn’t.

A trader protecting their position may have placed a stop loss order about 1 cent below that trend line.

The long term supply disruption theme remains intact, however the short term gyrations have seen it trade back to its 200 day moving average albeit its not yet oversold.

I may have a second chance to buy coffee around the $1.05 level, but I’ll watch it closely for the velocity of the decline and whether it holds recent lows.

September 29, 2020
by Rob Zdravevski

Buy a container of coffee beans

The price of arabica coffee has fallen to 4 year lows. (Are you paying less for your coffee lately?)

While the demand for coffee has remained steady for the past decade, only recently has supply increase, thus explaining the fall in the price of the commodity.

Compare this to the 1,000 cups that each Norwegian or Finn drinks, each year, which is equivalent to about 10 kilograms (kgs) of coffee.

Although Scandinavians love their coffee, the largest coffee market in the world is the United States of America, where it’s averaged that each person consumes 4 kgs per person, each year.

Roasted coffee beans Español: Granos de café t...So where is the upside?

The tea-loving Chinese only drink an average of four cups of coffee, per person, per year.
Just imagine if the Chinese taste buds change as Starbucks and Espresso bars start popping up around the place?

Or perhaps a wider group of Americans increase their coffee intake.
If that story doesn’t pan out, recent studies suggest that drinking coffee can halve the risk of suicide. As mental illness becomes prevalent and should the economy deteriorate again, it’s plausible that drinking more coffee could be added to a doctors prescriptions.

Although that advice won’t help the growing insomniac population, which is a future blog post topic.

So, with prices being low, it’s not a bad idea to go and buy a shipping container full of raw, green Arabica Coffee and keep them for a while.

“Green” coffee beans that are stored in a dry environment can last for up to 10 years.
Furthermore, stored beans are then considered “aged beans”, which over time lower their acidity and increase their body.

Just An Idea!

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