In the Grinder - Our Daily Coffee Weblog

Okay, that was a misleading title, because I am not going to pretend to tell you where we are going next, and neither should you listen to anyone who is telling you. If you can tell where the coffee market is going, well, close down your roaster, and just trade futures. Oh yea, there are people that do that, and they aren't roasters, they are traders, and they spend 18 hours a day, and there own money trading, and some make money, and some don't.

For Roasters, okay, we are up at seven year highs. Why, because world commodities are all at record highs, and someone said, "hey, coffee is still cheap." Around $1.20 is the longer run average price, so now we are 40% above that, but still cheap, if you look at wheat, copper, gold, oil, platinum, corn, soybeans, bean meal, silver, dirt, and everything else. Should commodity prices be at record highs, once again, if you don't think so, close your roaster, and start a hedge fund, and short them. Good luck!

Back to roasters, It's scary to buy here, but don't pick highs or lows, but hedge. Find the specialty coffees that you need, and if you sell at a fixed price to your customers, make sure that you have the coffee in place before you set those prices. If coffee stays here, well, it's here for everyone, and eventually roasters will have to raise their prices across the board. If you sell fixed price roasted coffee to your customers, and you hope that the market goes down before you buy the green coffee, so you can buy it cheaper, you just shorted the cofffee market. You can do that just by selling futures, and then you would not have to have a roaster, all those pesky employees, and the like.

Sorry for the sacasm. I was a trader for 8 years before I got into coffee. I traded propiertarily (mean the bank's own money to make money) in currencies, equities, commodities, convertable bonds, etc. and made money every month. It was a full full time job. I think it's a bit silly when some ower of a coffee kiosk read an article in a month old newspaper about a big supply of brazilian coffee, and now knows the market is going down. I have an opinion on where I think coffee may go ("may" being the key word) but we are flat, or completely hedged.

Sincerely,

Jason