The soft sector of the commodity markets may be the next leader of the commodity bull market
Port St. Luice, FL (PRWEB) July 9, 2008
The soft commodities such as coffee, sugar, cotton and orange juice are nowhere near their all time high prices like so many other commodities such as energies, grains and metals. "The soft sector of the commodity markets may be the next leader of the commodity bull market". Within the soft commodities, coffee futures may be the next commodity to make a historic bull market run.
In the early 2000's the price of coffee futures was at an all time low which forced many South American coffee farmers to replace coffee trees with soybeans, sugarcane and even coca, which is used to make cocaine. Some farmers kept their crops but neglected costly fertilizing and maintenance. This lack of production takes time to work its way through the enormous stockpiles of coffee available to the world markets. Visit http://www.tkfutures.com/coffee-futures-options.htm to learn more.
Coffee trees take three to five years to become fruit bearing and require lots of maintenance and fertilizing to keep them healthy. Coffee trees maximize their production at around fifteen years of age and are usually replaced because of diminishing yields from that point on. Coffee futures prices are starting to climb again which is incentive for coffee farmers to plant more coffee trees and nurse to health neglected trees. It may be 2 or 3 more years before a bumper coffee crop will hit the market and if demand stays the same coffee futures prices could hit new all time highs before then. Visit http://www.tkfutures.com/education.htm to learn more about the mechanics of coffee futures and options investing.
The South American coffee crop usually has to deal with a damaging freeze every 6 years on average with the most damage occurring between June and August. The last major frost in the world's largest producing country, Brazil, was in 1999. Brazil is due for a bout of damaging weather that hurts coffee bean yields. A freeze over the next two months in Brazil could send coffee futures prices dramatically higher. Visit http://www.tkfutures.com/coffee.htm to learn more.
Bad weather can also come in the form of a hurricane damaging the Central American coffee crops. Damage to South American crops may be drought or too much rain that actually can knock the flowers right off of the coffee trees making them incapable of bearing fruit.
Coffee futures prices are still 50% below their all time highs in spite of tripling in price since the 2001 low of .41 cents per pound. Coffee futures prices are very volatile and infamously expensive for coffee option purchasers and are not for the risk intolerant.
The author of this article is a 14 year veteran of the coffee futures and options markets and the president of T & K Futures and Options, Inc. Past performance is not indicative of future results and only risk capital should be used when speculating in coffee futures or options. Coffee futures and options investing carries substantial risk of loss and may not be appropriate for many investors. Visit http://www.tkfutures.com/services.htm to learn more.