What Causes Coffee Price Fluctuation & When Is the Best Time to Buy?
Coffee is the second-most globally traded commodity. Since it is such an active commodity on the market, many people are looking to get involved in investing with it. But before you invest in this commodity, it is important to understand fluctuations in prices, and when the best time to buy would be.
Coffee is grown on trees in the tropical areas of the world. After the beans have been picked, the green coffee beans are bagged and shipped. The commodity is then traded on world stock exchanges and basic fluctuations are affected by demand.
Besides demand, however, the biggest factors involved in fluctuation of coffee prices are based in weather patterns, politics, transportation costs, and speculations of production levels. Of all these, weather is the most unpredictable factor, and potentially has the greatest effect.
A drought or freeze, can destroy the trees that the coffee is grown on. This can cause the prices of coffee to rise dramatically, as demand remains the same but the supply is lowered. Inclement weather can also greatly hamper the transportation of the goods from the producer. Even the news of a possible drought or freeze can greatly stir the price of coffee.
Of course, while weather can have an impact on the prices of coffee, political turmoil will affect it as well, and sometimes quite dramatically. Many of the countries that coffee is grown in are engaged in hostilities, and skirmishes at borders will impact the supply.
With these things in mind, it is possible to determine the best strategy for getting involved in this commodities market. Keeping an eye on the news and events happening in the areas that coffee is grown in can give you a lead on the perfect time to buy.
For example, if your research shows that the upcoming year will be a particularly rough hurricane season, buying the commodity before the season begins could lead you to a great advantage when the storms set in. When the prices reach their peak, you could sell off all of the commodity that you cheaply purchased.
Keeping an eye on the politics of the areas, especially the news about outright war, would also be a good way to take advantage of upcoming political climates.
Understanding how the market can fluctuate from day to day will help you to take advantage of opportunities to get involved in the coffee commodities market as they come.
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