Forget Geithner and Bernanke - What about Joe?
- Take a deep breath
- And have a nice hot cup of joe
- An exotic coffee investment
I’m not going to rail against Tim Geithner or Ben Bernanke today. I’ve spent the better part of the last two weeks doing so. Too much anger is bad for the soul.
In the meantime, the world moves on. And commodity prices continue their march upwards.
So to cleanse the palate, I’m going to discuss how to invest in one of the most popular commodities in existence.
Coffee. As you may know, coffee is the second most popular beverage in the world after plain old water. In total, the world drinks 400 billion cups of coffee every year.
And yes, you can invest in coffee, and no you don’t need to open a futures trading account.
If you drink anywhere near as much coffee as I do, you probably should have some exposure to it in your portfolio. I’ve talked before about investing in what you know. I’m sure you’ve heard it from other sources as well.
And of course it’s easier to invest in a market, product or commodity that you know, because you understand it already. A good chunk of the research has already been done.
But there’s another benefit to investing in what you know - especially when it comes to commodities.
I consume a truly prodigious amount of coffee everyday; sometimes as many as 10 cups. Giving my portfolio exposure to coffee will mitigate any price increases that I’ll see at the grocery store or the coffee shop.
If I invest wisely enough, my investment profits could even usurp the costs that I incur to keep my brain filled to the brim with caffeine on a bi-hourly basis.
Before I tell you the name of the coffee company that you might consider investing in, I’ll give you a 90 second overview on the two types of coffee.
There are dozens of varieties of coffee, but they all fall into one of two categories: Arabica or Robusta. Arabica coffees are prized for their flavor and complexity. They only grow in very specific regions, and grow much more slowly than Robusta coffee. Robusta coffee is higher in caffeine, but it’s of lower quality and hence cheaper.
Fortunately, there’s one publicly traded company that supplies most of the world’s Robusta coffee.
It’s called Olam International (SGX: OLAM.SI). It’s a $7 billion company based in Singapore.
Unfortunately, it trades on the Singapore Stock Exchange (SGX). That makes it tough to buy shares unless you have a specialized brokerage account with someone like Interactive Brokers.
Olam is also listed on the pink sheets with the ticker OLMIF.PK. But like most pink sheets exchanged stocks, the volume is extremely low. Some days, zero shares are traded. If you buy shares, you might have a hard time ever selling them so I’d recommend steering clear of this security.
But if you can buy stocks trading on the SGX, this company could be a great way to benefit from the likelihood that Robusta prices will rise.
Of course, Olam doesn’t just deal in coffee. It’s basically the General Mills of southeast Asia – the company produces and sells products in 20 different agricultural categories across 60 countries.
It’s a great play on a variety of agricultural commodity products. I kind of stumbled on this company doing research for coffee, but I’ll definitely be keeping my eye on them as a way to benefit from higher food prices. Of course as always, make sure to do some fundamental research and pay close attention the share price valuation.
Kevin McElroy
Editor
Resource Prospector
Full disclosure: No positions as of this writing
