Where are all the Coffee Traders?

April 20, 2011 Attain Capital 2 Comments  Like
Markets

With all of the focus lately on Crude Oil, metals like Gold and Silver, and grain markets; attention appears to have been deflected attention away from another market which has bounced back nicely: Coffee.

Prices in New York have climbed to a 34-year high on a broad rally in commodities today on the back of reports earlier in the week that the world’s largest grower, Brazil, would experience a cyclical decline in output occurring in two years, according to a Bloomberg report which said the coffee output of Brazil will be 13% smaller this harvest when compared to last year’s.  Additionally, a Rabobank report showed a stronger Arabica forecast for the rest of 2011. And despite its blanket warning for commodities last week, a Goldman Sachs report has also been in favor of enhanced prices for coffee as demand across the emerging markets like India and China are expected to remain robust.  Meanwhile, there are reports that adverse weather characterized by above-average rain fall slated for next month may negatively affect coffee output in Colombia, the second-largest producer of Arabica beans after Brazil.

According to FinViz.com, Coffee is up 24.9% so far this year, and 128.9% over the past 12 months, which is second to only Silver (+153.4%) over that period.

Coffee 4-20-11

[Source: FinViz]

And yet… looking over the CTAs we’re working with, it seems as though no one is biting for the long positions in coffee- not even Dighton Capital Limited, LLC, which has been well known for latching onto the softs markets, and seemed to have the perfect counter-trend set up they like to jump into as a contrarian during Coffee’s sell off in March (down 10% from its 2011 high at one point).

The only CTAs that are trading coffee right now are diversified option sellers Financial Commodity Investments (FCI) – OSS and HB Capital Management Diversified Options, which would actually prefer the market was more range bound than heading higher and higher.

Why the hesitation to participate among other programs? Probably because Coffee has long been considered one of the more volatile commodity markets (sometimes mentioned in the same breath as Pork Bellies). But in looking at the average daily move and volume comparisons, it doesn’t seem that reputation is all that valid.  Perhaps more CTAs should look at adding it to their portfolios, before it retraces all the recent gains in a nice downtrend…

2 comments

  1. JRCCNavigator
    April 26, 2011

    Actually, there is one trader that is long coffee. The James River Navigator Program is long coffee in 7 out of 10 systems.

    Regards,

    Robby Stamper
    Navigator Fund
    James River Capital Corp

  2. Attain Capital
    April 26, 2011

    You are correct- apologies for the oversight.

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The Quintile Rankings and RCM Star Rankings shown here are provided for informational purposes only. RCM does not guarantee the accuracy, timeliness or completeness of this information. The ranking methodology is proprietary and the results have not been audited or verified by an independent third party. Some CTAs may employ trading programs or strategies that are riskier than others. CTAs may manage customer accounts differently than their model results shown or make different trades in actual customer accounts versus their own accounts. Different CTAs are subject to different market conditions and risks that can significantly impact actual results. RCM and its affiliates receive compensation from some of the rated CTAs. Investors should perform their own due diligence before investing with any CTA. This ranking information should not be the sole basis for any investment decision.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

The programs listed here are a sub-set of the full list of programs able to be accessed by subscribing to the database and reflect programs we currently work with and/or are more familiar with.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history. Individuals cannot invest in the index itself, and actual rates of return may be significantly different and more volatile than those of the index.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

Limitations on RCM Quintile + Star Rankings

The Quintile Rankings and RCM Star Rankings shown here are provided for informational purposes only. RCM does not guarantee the accuracy, timeliness or completeness of this information. The ranking methodology is proprietary and the results have not been audited or verified by an independent third party. Some CTAs may employ trading programs or strategies that are riskier than others. CTAs may manage customer accounts differently than their model results shown or make different trades in actual customer accounts versus their own accounts. Different CTAs are subject to different market conditions and risks that can significantly impact actual results. RCM and its affiliates receive compensation from some of the rated CTAs. Investors should perform their own due diligence before investing with any CTA. This ranking information should not be the sole basis for any investment decision.

See the full terms of use and risk disclaimer here.

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