Exchange traded notes that follow coffee futures have been lackluster performers along with prices over the past year. However, weak harvest outlooks and rising coffee consumption could strain the market and trigger a price rebound, according to a report this week.
Coffee ETNs such as iPath Dow Jones-UBS Coffee Sub Index Total Return ETN (NYSEARca: JO) and iPath Pure Beta Coffee ETN (NYSEArca: CAFE) have had a tough year.
“There is a bit of supply available but you have a deficit year coming so we have to be awfully careful here and not be too bearish,” Eric Nadelberg, Senior Vice President at Jefferies Bache, said in a Reuters report. “There is not a lot of coffee and as we move forward this will become more acute,” he told Reuters. [Investors Look to Commodities ETFs for Diversification]
Coffee declined on the futures market last year in part because of increasing supplies from places like Vietnam, Brazil and Ethiopia, where crops are coming in higher than originally forecast. However, this year the outlook for sub-par harvests are on the radar and overall faster consumption rates could set up the coffee-focused ETNs for a run. [Coffee ETNs Get a Jolt in August]
JO tracks coffee futures contracts, and average daily trading volume is weak at less than 20,000 shares per day.