Breakfast futures encourage investors to diversify

Mexico City — Breakfast is the most important meal of the day and investors know it. The increase in the price of raw materials opens up a possibility to obtain juicy profits.

The escalation observed since the economic opening last year has left returns that exceed 70%, it is about the future contracts of coffee and frozen orange juice.

At the end of 2021, coffee futures showed an increase of 76.29%, going from US$128.25 to $226.10 per 100 pounds. These contracts are considered the benchmark for the cost of Arabica coffee, a variety grown in Latin America. The price is a reference for 19 producing countries.

“Since the beginning of the economic recovery, it began to be observed that the prices of raw Materials they began to appreciate”, said the director of Financial Analysis at Black Wallstreet Capital, Jacobo Rodríguez.

The price of raw materials has increased after inventories were affected by the pandemic, due to problems in the supply chain and increases in energy prices.

Among the main coffee producing countries, Colombia, India, Guatemala, Indonesia, Mexico and Ethiopia stand out. However, the participation of Brazil stands out, as it is responsible for 33% of total coffee production.

Coffee prices have been boosted by low production in the face of dry weather in Brazil, coupled with the crisis in the supply chain. Both factors have led to registering maximum levels since March 2012.

Within cyclical assets and advances at breakfast, frozen orange juice shows up on radar. At the end of 2021, the price of the frozen drink showed an increase of 18.70%, going from US$123.25 to $146.30 per 100 pounds of juice.

In addition, the price of orange juice registered maximum levels observed in October 2018.

The price of frozen citrus showed a rebound since February 24, equivalent to a rise of 9.38% from US$136.08 to $148.85, closing of the day on Thursday, March 3.

Frozen concentrated orange juice contracts are traded on the Intercontinental Stock Exchange (ICE). According to information from the stock center, the contract quotes the physical delivery of the US grade A frozen beverage. This is a classification made by the US Department of Agriculture.

The countries that participate in the delivery of orange juice are the US, Brazil, Costa Rica and Mexico.

Orange juice prices began to be above US$100 since March 18, 2020, since then it has fluctuated between US$104 and up to $161.

Both investment instruments are a cyclical option. These types of assets are influenced by climatic issues such as droughts or, on the other hand, frosts.

Although both contracts are independent, the market awaits the arrival of an exchange-traded fund (ETF) of Direxion’s Breakfast Commodity Strategy. This vehicle will track an index focused on coffee, orange juice, wheat and lean meat futures.

This ETF seeks to take advantage of the increases that the contracts have presented. The application is still pending before the Securities and Exchange Commission.

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