Many traders and investors have been selling coffee futures ($KC) since may 2011 when coffee futures traded as high as $308.90 per contract. Coffee futures are now trading around the $140.20 level today. This has certainly been a serious bear market for one of the most popular commodities in the world.
Coffee futures are now very oversold and look to be making a final low. Due to the severity of the down trend in the coffee futures, further declines cannot ruled out. However, that is typically when the large institutions will start to accumulate the commodity. Any downside from here should be very limited. The monthly chart of coffee futures has very good support around the $132.00 level. Traders can also trade and track the action in the price of coffee by following the iPath DJ-UBS Coffee Subindex Total Return SM Index ETN (NYSEARCA:JO).
Traders should understand that higher coffee prices in the future could hurt leading stocks such as Starbucks Corporation (NASDAQ: SBUX
), Green Mountain Coffee Roasters Inc (NASDAQ: GMCR
), Coffee Holding Co Inc (NASDAQ: JVA
), and Farmer Brothers Co (NASDAQ: FARM
), and Dunkin Brands Group Inc (NASDAQ: DNKN
). All of these stocks should be viewed on an individual basis.