Why Coffee Price Could Rise as Demand Rises

By Crispus Nyaga

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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