After see-sawing for the major part of 2016, coffee prices are finally showing an upward trend. Unsurprisingly, this is being mimicked by the two coffee ETNs – iPath Bloomberg Coffee Subindex Total Return ETN and iPath Pure Beta Coffee ETN – which surged 9.1% and 6.9%, respectively, in the last 5 days (read: What Pushed Up These Agricultural ETFs?).
One of the primary drivers of this rally is supply concerns in Brazil, the largest coffee producer in the world. Speculations regarding the impact of heavier-than-expected rainfall are doing the rounds. If heavy rainfalls witnessed in May continue in June, it could disrupt the harvesting process and damage beans. Meanwhile, the rally was also supported by appreciation in the Brazilian real, which boosted coffee prices (read: Best Performing Currency ETFs of Q1).
However, several analysts are skeptical about the continuation of the rally as they are forecasting that Brazil's coffee crop for 2016-2017 will grow by 10% to cross the 54 million bag mark. In addition, Colombia is expected to increase coffee production this year, which is estimated to be around 14 million bags.
Despite this, if investors believe that coffee prices are poised to soar, they could gain an exposure through the coffee ETNs – JO and CAFE (see all Agricultural ETFs here).
JO
This ETN tracks the Bloomberg Coffee Subindex Total Return, providing the returns that are available through an investment in the futures contracts on the commodity of coffee. The note has garnered nearly $153.1 million in assets and trades in a volume of 165,000 shares on average. The product is expensive with 75 bps in annual fees. It has a Zacks ETF Rank #4 or “Sell” rating with a High risk outlook.
CAFE
This ETN follows the Barclays Coffee Pure Beta TR Index, providing returns that are available through an investment in the futures contracts in the coffee markets. The index consists of a single futures contract but it has a unique roll structure which selects contracts using the Pure Beta Series 2 Methodology. CAFE is quite overlooked as it has gathered only $5.6 million in AUM and is thinly traded with an average volume of roughly 3,000 shares. This note also charges 75 bps in annual fees. It also carries a Zacks ETF Rank #4 with a High risk outlook (read: Coffee Prices Crumbling: What Is The ETF Impact?).
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Will the Rally in Coffee ETNs Last?
After see-sawing for the major part of 2016, coffee prices are finally showing an upward trend. Unsurprisingly, this is being mimicked by the two coffee ETNs – iPath Bloomberg Coffee Subindex Total Return ETN and iPath Pure Beta Coffee ETN – which surged 9.1% and 6.9%, respectively, in the last 5 days (read: What Pushed Up These Agricultural ETFs?).
One of the primary drivers of this rally is supply concerns in Brazil, the largest coffee producer in the world. Speculations regarding the impact of heavier-than-expected rainfall are doing the rounds. If heavy rainfalls witnessed in May continue in June, it could disrupt the harvesting process and damage beans. Meanwhile, the rally was also supported by appreciation in the Brazilian real, which boosted coffee prices (read: Best Performing Currency ETFs of Q1).
However, several analysts are skeptical about the continuation of the rally as they are forecasting that Brazil's coffee crop for 2016-2017 will grow by 10% to cross the 54 million bag mark. In addition, Colombia is expected to increase coffee production this year, which is estimated to be around 14 million bags.
Despite this, if investors believe that coffee prices are poised to soar, they could gain an exposure through the coffee ETNs – JO and CAFE (see all Agricultural ETFs here).
JO
This ETN tracks the Bloomberg Coffee Subindex Total Return, providing the returns that are available through an investment in the futures contracts on the commodity of coffee. The note has garnered nearly $153.1 million in assets and trades in a volume of 165,000 shares on average. The product is expensive with 75 bps in annual fees. It has a Zacks ETF Rank #4 or “Sell” rating with a High risk outlook.
CAFE
This ETN follows the Barclays Coffee Pure Beta TR Index, providing returns that are available through an investment in the futures contracts in the coffee markets. The index consists of a single futures contract but it has a unique roll structure which selects contracts using the Pure Beta Series 2 Methodology. CAFE is quite overlooked as it has gathered only $5.6 million in AUM and is thinly traded with an average volume of roughly 3,000 shares. This note also charges 75 bps in annual fees. It also carries a Zacks ETF Rank #4 with a High risk outlook (read: Coffee Prices Crumbling: What Is The ETF Impact?).
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