Up almost 59% and 55.2%, respectively, year-to-date, the iPath Dow Jones-UBS Coffee Total Return Sub-Index (JO) and the iPath Pure Beta Coffee ETN (CAFE) are two of this year’s best non-leveraged exchange traded products.
One would not know it if one only focused on the ETNs’ performances over the last two weeks. Since March 11, CAFE is off 14.1% while JO is lower by 15%. Coffee futures tumbled last week on growing hopes that rainfall will alleviate Brazil’s drought. Brazil is the world’s largest producer and exporter of Arabica-grade coffee beans. [Coffee ETNs Flirt With Bear Territory]
JO has steadied this week and was up 1.1% heading into Friday’s session. Some coffee market observers think the commodity’s recent pullback is a pause before futures again head higher. Assuming dry weather in Brazil next month, coffee futures could touch $3 per pound, Shawn Hackett of the “Hackett Flow Money Report” told Trang Ho of Investor’s Business Daily.
Earlier this week, coffee futures resided around $1.76 per pound and while Brazil is the dominant grower in the market, robusta futures could get a lift as well due too much rain in some parts of Southeast Asia and not enough in Vietnam, the world’s largest robusta coffee grower. [Ag Commodities Lifting This ETF]
“Should the market be worried about a failed Vietnamese crop on top of the current failed Brazilian crop, the upside potential could be monumental and unimaginable,” Hackett told IBD.
JO’s 52-week high is just over $41, but if the ETN can make a run to $43, it would be the first time since October 2012. JO has not closed above $44 since July 2012.
iPath Dow Jones-UBS Coffee Total Return Sub-Index ETN
ETF Trends editorial team contributed to this post.
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.