Why Coffee Price Could Rise as Demand Rises

For decades, coffee has been an
important staple for American and Western consumers. In the United States,
people consume an average of three cups of coffee every day. This has made
coffee companies among the biggest in the US. Companies like Starbucks and
Dunkin Brands have market valuations of more than $85 billion combined.

In the past, coffee was not an
important drink in Asian countries where most people preferred tea. This is now
changing and China has become the fastest growing coffee country in the world.
In fact, Starbucks has more than 3300 stores in China. It is also opening a new
store every 15 hours in the country. In addition, local Chinese coffee brands
are coming up. The biggest threat to Starbucks is a company known as Luckin
Coffee is opening more stores. The reason for all this is that there is some
growth among the Chinese middle class, who often like to copy what the
Americans do.

Coffee is not grown in many
countries. It also takes a long time to grow, which makes it different to other
crops like corn and soybeans. The biggest exporters of coffee are Brazil,
Vietnam, and Columbia. After seeing its price rise in the fourth quarter, the
price started to decline and reached a low of one cent this week. Since then,
the price has started rising as hopes of global growth rise.

In the chart below, the price of
coffee is below the 42-day and 21-day EMA while the two averages appear to be
nearing a crossover. If this happens, there is a likelihood that the price will
continue moving up. If it does, it will likely test the important resistance
level of 105.

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