Weak Currencies of Exporting Countries
The depreciation of the currency – especially the Brazilian Real which impacted coffee prices the most, and partly the fall in the Indian rupee, dampened coffee prices. A weaker currency allows exporting countries to sell higher amounts which in turn increases availability in the market but at the same time pressurizes prices.
Goldman Sachs cautioned investors against hopes of a recovery in Arabica prices. Huge production in the off-year of its biennial production cycle is keeping a lid on increases in the short to medium term (Read: Play Goldman’s Views with These Commodity ETFs).
Given this languishing trend, we caution investors who still are long on coffee instead of shorting the product. As such, JO currently carries a Zacks ETF Rank of 4 or ‘Sell’, indicating that the fund might face significant bearishness in the months ahead.
Presently, the fund is hovering just over its 52-week low price of $15.42 per share suggesting that the product has way to go for recovery.
On an overall basis, soft commodity ETF investing has been pretty rocky this year mostly on easing supply concerns. Products covering sugar, wheat, soybean, and corn all have Zacks ETF Ranks of #5 (strong sell) affirming the fact this is certainly the space to be avoided in the near term barring some exceptions like cocoa (NYSEARCA:NIB) which carries a Zacks ETFRank #3 (Hold).
This article is brought to you courtesy of Eric Dutram.