September 26, 2014

Investors are being drawn to the smaller markets of cocoa, coffee, and cattle that are proving less vulnerable to market volatility than other raw commodities such as corn and soybeans.  Coffee and cocoa trees take at least three years to reach full output and cattle aren’t typically slaughtered for beef until between 18 and 22 months of age.  These longer lead times toward increased production keep supplies tight and prices elevated.  In comparison when supplies tighten for corn or soybeans, a bumper crop could be produced within months.  Arabica coffee futures are up 65% this year, cocoa is up 23%, and cattle is up 16% sparking hedge fund bets to reach multi-month highs compared to a significant withdrawal from commodities such as soybeans or copper.  As the number of people worldwide that can afford small luxuries such as coffee and chocolate continues to rise, these smaller, slower-reacting outlier commodity markets are seeing growth. Latin America’s coffee market is set to grow by 5.7% this year, and beef and veal consumption in China is on pace to increase by 5.1% while the U.S. Department of Agriculture (USDA) predicts that the price of beef and veal will increase between 8% and 9% this year.  To read further:

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