A great number of people start their day with a cup of coffee. Did you know that coffee, after petroleum, is the most traded commodity on earth? This popularity, combined with the fact that the supply fluctuates depending on the quality of the harvest, makes investing in coffee very attractive.
How can you invest in coffee?
It is obviously very impractical to have bags of coffee delivered to your home. Buying up all the packs of coffee in the local supermarket is also not possible. Fortunately, there are practical ways to invest in coffee. Investing in coffee is usually done with derivatives. Derivatives are contracts on, for example, a commodity where you only trade in the underlying price and not in the commodity itself. That way you do not have to worry about kilos of coffee being delivered, which also spares the postman’s back!
You can trade these contracts or CFDs with an online broker. A good online broker for coffee is Plus500. Plus500 is a broker that allows you to trade in CFDs on all known commodities. It is possible to buy directly or to go short. When you go short on coffee, you earn money when the price of coffee drops. This makes it possible to place an order for your coffee investment in any market situation! Click here to open a free (demo) account at Plus500 >>
Success with coffee investments
When you invest in coffee, it is important to keep an eye on the supply. A big advantage of coffee is the fact that many people are very accustomed to drinking it. Thus the demand will not suddenly drop decrease significantly. It is therefore mainly the supply side that will determine the final price of coffee. Moreover, coffee is a basic product which is often consumed even in economically hard times. This makes it easier to predict the price of coffee than, for example, the price of a stock in a social media company.
Therefore, you can follow the news carefully and try to determine how the harvest will go. A lot of coffee comes from Colombia and for a long time they suffered from leaf rust. Such a situation can have a strong influence on the supply side of coffee and this can drive up the price of coffee. In the meantime, they have succeeded in developing a rust-resistant variety that has solved this problem.
Investing in coffee stocks
Of course, it is also possible to invest in coffee stocks. You can buy these stocks through an online broker. However, it is important to take into account the additional factors that are important for coffee stocks. Obviously, the coffee price will continue to play a role, but matters connected with the company now also play a role. For example, the quality of the management and the company’s turn over are important factors. Some examples of coffee stocks are Nestlé, Douwe Egberts and Starbucks.