I wanted to give one last update in 2011 on my running commentary on the Commodity Price for arabica coffee. I have been predicting a drop in price all year and expected the price to approach $2.00 by the end of the year. As I type, the price is $2.2090 and pushing up against the resistance set up at $2.20. Time will tell when it breaks through and accelerates down, but the main reason for my post is to shed some light on the conditions within the BRIC nations (Brazil, Russia, India, China) who were credited early in the year by many "experts" as being the reason demand for arabica was exceeding supply. While I completely disagree with this characterization of their current influence (rather than their potential) I thought I should share some actual data which reduces even their potential impact on the price.
Year to Date, the BRIC nations economic vibrancy as expressed through their Equity Indexes have shrank by the following percentages:
Brazil: -18%
Russia: -23%
India: -23%
China: -18%
Given that discretionary consumption is fed by increases in wealth, and that the relative prosperity of those wealthy enough to invest surplus cash in equities has diminished in BRIC nations, the likelihood that coffee will be able to significantly increase market penetration under these conditions is doubtful. While I have read many experts and publications are predicting coffee will again test the $3.00 level, I'd be very happy to invest against that prediction based on current crop predictions and current consumption levels.
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You are correct! Market at 2.01 today. This is extremely helpful information for those of us who are less experienced and less inclined to study the markets. I hope your 'investments' went well.
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