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Coffee Goes After The Lows

From seekingalpha.com

As I sit here sipping my morning cup of coffee and reflecting on the low price of the fragrant beans, I ponder the many markets that I had watched over the past four decades when they fell to the bottom end of their pricing cycles. It is so easy to get bearish when prices are moving to the downside as trend-following, and bearish sentiment often pushes commodities prices to levels that are unsustainable on the downside. Unlike stocks, commodity prices rarely, if ever, go to zero. The price of electricity can go to zero because of its position as a “use it or lose it” product. The only futures market to ever trade at zero was the onion market. The story goes that an oversupply of onions drove the futures price to zero where longs took delivery and dumped the onions in the lake in Chicago only to sell the burlap bags to recover some of their losses. Coffee futures, on the other hand, is not going to zero.

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