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Coffee ETF Falls to Multiyear Low as Shorts Pile On


A commodity that has been in serious need of a “jolt” as of lately, ironically, is that of Coffee. The iPath Coffee Total Return ETN (JO) has been languishing at its lowest levels in nearly two years as has its sister exchange traded note, iPath Pure Beta Coffee (CAFE).

Unlike many agricultural commodities which have risen notably in price this year amid the drought conditions that existed in much of the U.S. throughout the spring and the summer, Coffee prices have dropped steeply in recent months (for reference, JO traded as high as $46.05 in July, but closed at $34.45 yesterday).

While the drought in the U.S. has caused scarcity at times for certain crops, Coffee beans, which are grown largely in countries such as Vietnam, Indonesia, and South American countries like Colombia and Brazil, are not hard to come by these days.

In fact, quite the opposite is true, as record harvests have hit the market in the month of October and rainfall has largely been present in the coffee producing regions of the world at the correct times (notably the flowering period).

Short sellers apparently have been paying attention since there is currently a record net short position held in Coffee futures and options tied to Coffee, and thus far amid the commodity’s price plunge, they have been right on target.

However, like anything that attracts heavy short interest, any sign of the reversal of weakness often causes exaggerated moves to the upside given the pent up buying pressure that may exist for those shorts looking to protect profits. Year to date, JO has fallen 39.04% while CAFE has declined 37.35% and volume has been well above average in JO the past several weeks.

iPath Coffee Total Return ETN

For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.