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Coffee ETFs Are a Good Option for your Retirement

by PaulMarket

Coffee has always been one of investor's favorite options for ETFs, but they aren't speaking about Starbucks; they are talking about investing in the commodity. The commodity depends mostly on climate and supply and demand factors, while Starbucks depends on other factors that cannot be foreseen or studied as accurately. The focus of this article concerns investing in coffee, the commodity.

Changes in the Chinese and European markets have caused coffee prices to rise and fall wildly lately. After some time the price has become stable and it has based at 320 where it is holding. The market and the players have shown their cards and the market is soon to rise. Changes for the better in the middle class economy permit them to visit with their friends and drink more coffee.

With the improved economies people are starting to go out again, thus increasing their coffee consumption. The Asian market with China taking the leading position is something to pay close attention to. A 10% to 15% increase every year is a lot of coffee. Back in 2006 they were buying 45,000 tons per year, today, five years later it has multiplied putting pressure on the market.

Coffee prices have leveled off at 320; they will soon start to rise. Making a long term investment in coffee ETFs, right now is a sound investment. The medium term market looks good but it can change suddenly due to atmospheric conditions. Long term purchase sounds better because a market fall will not kill you because the ETFs are not leveraged. A 20% to 25% stop loss would also help to protect any investment.

Additional factors that affect the price of coffee is weather conditions and harvest levels in Central and South America. Changes in these regions point towards a steady rise in prices over the long term. The reduction in supply along with added consumption in China and the European markets is supporting the price of coffee at high levels. A leveling off of the economy is starting to level off coffee demand. Once it starts to rise it will continue steadily upward pushed by the market, especially if demand increase and supply decreases, as is expected.

Climate and collection conditions in production areas in America lead to believe that the price will start rising soon. Greater consumption in Europe and China will only fuel the price faster and steadier. Now is a good time to buy coffee ETFs long term so you can provide for your pension nest egg.

About the Author: Frank Cole

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Coffee ETFs Are a Good Option for your Retirement