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Coffee ETN Gets Hyper as Brazilian Crops Wither


After experiencing their largest gain in almost a decade, coffee prices, along with the related exchange traded note, is rallying even higher Wednesday as fears on Brazilian crop yields jolt traders.

The iPath Dow Jones-UBS Coffee Total Return Sub-Index ETN (JO) rose 10% Wednesday after gaining 9.1% Tuesday. The ETN is up 12.3% over the past week and up 41% year-to-date. [Trying to Get Involved With the Coffee ETN]

Meanwhile, ICE Coffee futures increased 8.8% Wednesday. Contracts on arabica coffee beans marked for March delivery jumped 9.1% to a 13-month high Tuesday, the largest one-day percentage rise since November 2004, reports Alexandra Wexler for the Wall Street Journal.

Coffee prices have been soaring this year as traders pushed up prices, betting on significant crop damage in Brazil, the world’s largest producer of coffee beans, as dry weather stunts growth in a crucial stage in the beans’ development.

Commodities traders will get a better picture of the extent to Brazil’s crop damage at the end of the month when the coffee cherries are more developed – growers will see whether the cherries are smaller than normal or are falling off prematurely.

In Brazil, temperatures in the prime coffee regions are expected to remain above-normal with limited rainfall over the next five days, forecaster DTN said.

“We have to expect to see a lot of volatility [in coffee prices] in the next week or so” until more is known about the crop damage, Hernando de la Roche, senior vice president at financial-services firm INTL FCStone, said in the article.

Additionally, prices in sugar, another one of Brazil’s large agricultural crops, is experiencing gains. The iPath Dow Jones-AIG Sugar Total Return Sub-Index ETN (SGG) was up 1.2% Wednesday and rose 5.7% over the past week. [Brazil Drought Sweetens Sugar ETNs]

iPath Dow Jones-UBS Coffee Total Return Sub-Index ETN

For more information on coffee, visit our coffee category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.