Buying (Going Long) Coffee Futures to Profit from a Rise in Coffee Prices

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What I Learned From Quitting Coffee After 15 Years Of Daily Consumption

I used to drink coffee on a daily basis since I was a teenager.

Every now and then I toyed with the idea of drinking less coffee, but I never made an attempt at giving it up. Tolerance develops quickly when you drink it regularly and I hadn’t felt the waking effect in a long time. I drank coffee for no particular reason other than having come to like its taste.

Two weeks ago I stopped cold turkey. Here’s the backstory, how I did it, and what I noticed since making the change.

Rising Consumption

Coffee had been my constant companion since I was a teenager. At home, in school, at the university. I was hooked on the stuff early on, partly because my parents used to drink the black energy liquid one cup after the other when I grew up.

It was normal to drink coffee. For breakfast, after and during lunch or dinner, or in-between whenever one felt like it. We would walk over to the machine, place a cup under the dispenser and wait for the rhythmic noises in anticipation of the delicious odor that would soon fill the air. Coffee was my family’s hot beverage of choice. It was the default option.

In high school, we had coffee machines at the canteen and I would pour myself a cup whenever I had the chance to do so.

During the first years at the university, I regularly drank coffee from vending machines around the campus, but it was during my Master’s that I increased my consumption even more. I picked up the idea that ‘ science is fueled by caffeine’ and made sure to be part of it.

After starting my PhD I introduced a bunch of changes to my life and built several habits. In the course of this, I restricted myself to drink only four cups of coffee per day.

This held up for about three years. There have been exceptions of course: One day during a road trip in Arizona with friends, I bought a 1.5 liter bottle of unsweetened Starbucks espresso in a grocery store. While driving that day, I kept sipping from that bottle all day long. When we arrived at a Motel in the evening, I started to feel a little uneasy and sick and had to stop. That was the only time I can remember feeling that I had too much coffee.

Generally, though, my ‘four cups’ restriction held up until recently. As I worked more and more from home, my coffee consumption increased to about five or six large mugs of instant coffee per day.

A Comfort Zone Challenge

What eventually sparked the idea to give up coffee for a while was something unexpected.

It was only after writing a story about stepping out of one’s comfort zone that I decided I could do that: I could make myself a little uncomfortable and stop drinking coffee. For the sake of a higher goal, one further down the path of my life, living healthy and avoiding consuming stuff that might not be good for me.

Thus, while writing about the idea in my diary on Monday morning (26th of March), I drank up the mug of coffee that stood beside my notebook on the table, knowing that this would be my last one. At least for a while.

No more coffee. Cold turkey. Just as I did it when I stopped smoking years ago. Whenever I thought about drinking a coffee, I simply drank a glass of water or made myself a cup of tea instead.

How I Pulled It Off

I had surprisingly little difficulty giving up coffee. I didn’t feel more tired or less alert during my days. I didn’t feel much craving for coffee. Sure, the first few days I thought every once in a while “now I’d be drinking a coffee normally”, or “wouldn’t a cup of coffee be great now?” But there was no strong craving, contrary to what I had expected when I began. I may just have been lucky or it might have helped that I still drink tea with caffeine and a lot of water.

Maybe I expected it to be much more difficult based on my own experience with giving up smoking about nine years ago. During the first days and weeks of doing that, I certainly felt a strong craving for nicotine. Months and even years later it would still surface at times, though luckily it eventually vanished.

Whether that is just due to the difference in the substances — nicotine is much more addictive and thus also more inclined to lead to physical withdrawal symptoms — or also linked to how I approach behavior changes these days, I couldn’t say.

It certainly helped that I was a lot around my girlfriend these days, who rarely drinks anything else than water. I had her complete support all the time and no one luring me with the smell of a freshly brewed coffee or asking me to come for a coffee break with them.

I expect that it might get difficult when I’m in the office or around people who drink coffee, but by now I imagine I can instead just drink a cup of tea while they sip their coffee, and nonetheless take part in ‘coffee’ breaks and still have the social benefits that come with those.

What also didn’t happen were any improvements in health that were observable. Yet. I didn’t really expect anything like that, though, because a lot of these changes are subtle and will play out in the long run.

Two weeks later I can begin to assess the changes I did see.

Results

I expect removing coffee from my drinks will have a positive effect on my overall health in the long run, particularly for the cardiovascular system.

But what changes did I notice so far?

Caffeine consumption decreased (about 80%) ⇘

While I still consume caffeine in the form of green and black teas, my caffeine consumption went down drastically.

According to a report from the Mayo Clinic, black tea has about one third of the caffeine content of brewed coffee, green tea about one fourth or fifth. All the other teas I drank over the time don’t have any caffeine in them.

The numbers can only be used as a rough guide, given that roast and brewing temperature, time, and amount of coffee powder and whatnot all influence how strong a coffee ends up. Still, I roughly decreased my caffeine intake from about 5–6 large mugs of coffee (

600mg) to about one black tea and maybe three mugs of green tea per day (

While it was never the goal to quit caffeine altogether, it was clear that this would happen and that it will probably have a positive long time effect on my health.

Sugar and milk consumption dropped ⇘

I would usually drink coffee either in the form of a short espresso with a spoonful of sugar, or in huge mugs of coffee with a splash of milk.

I still have milk in my breakfast muesli and a little splash in my teas, but that’s it. I’d say this makes about 2dl less milk per day.

Besides coffee, I don’t usually sweeten any foods or drinks with sugar. Not even my tea. Consequently, my refined sugar intake — at least the one I can control and isn’t hidden in processed foods — dropped basically to zero.

Tea consumption increased ⇗

I decided that I still liked to have a hot beverage every now and then, especially since it’s still rather cold here at the moment, the winter hasn’t really worn off completely yet even though spring has officially begun.

Thus I began to drink more tea than I have in years. Apart from the habit of drinking a cup of green tea with my breakfast and the occasional binge-drinking of herbal teas when I have a cold or a cough, I haven’t drunken much tea over the years.

Self-image as an addict vanished

I don’t see myself as a caffeine addict anymore. That means that I don’t see myself as an addict to any substances anymore. I used to smoke, I used to binge drink alcohol, and for all these years I used to drink coffee and think of myself as someone who needs that stuff to be alert and focused at work or while studying.

By now I know that I don’t need any of these, that I can live happily without having a constant need for any specific substance. That’s a huge improvement in my own understanding of the control I have over myself, over my behavior and body. While I had learned this to a certain degree before— e.g. by establishing positive habits — it feels still empowering to realize that there are no substances anymore which have such a power over me.

Saving money

Coffee isn’t cheap. For the capsules to the coffee machine at the office I used to buy two packs of 30 capsules for about 17 CHF (that’s about 17 USD) every three weeks. I spent less when using the instant coffee variation, but way more when buying a cup at a coffee shop every now and then. Thus, while it might not be the worst money waste, I think I can easily save the equivalent to five annual Medium membership subscriptions by switching from coffee to tea and water.

My girlfriend called me a badass

She’s all in favor of me not drinking coffee anymore. Still, she was rather surprised that I simply did that out of the blue one morning and then stuck to it for days.

Until now she’s the only person who knows about it. I assume it will get tougher when I visit my parents in whose kitchen the scent of freshly brewed coffee constantly hangs in the air.

The Overall Effect Of The Experiment

I proved to myself that I can do it. I can give up something I liked for a long time even though I knew it wasn’t good for me. If nothing else, this fuels my confidence in being able to change deliberately, to accomplish something I had not thought I would be able to do. Something I had done for years and years without questioning.

I could change. Just like that. On an ordinary Monday morning.

And that’s what I want to end this story on. We don’t have to continue doing things just for the sake of it. On any ordinary day, we have the power to question the status quo in our lives and do something about it. We can reduce negative behaviors and increase those which are positive. Every day. There’s no need for an extraordinary event to change. No New Year’s Eve or huge life event.

We all have the power to constantly change. To change our behavior. To change our lives. For the better. Every day.

Do not wait; the time will never be “just right.” Start where you stand, and work with whatever tools you may have at your command, and better tools will be found as you go along. — Napoleon Hill

Finance English practice: Unit 34 — Futures

  • Complete the sentences below. Use the key words if necessary.
    • Commodity futures

    are agreements to sell an asset at a fixed price on a fixed date in the future. are traded on a wide range of agricultural products (including wheat, maize, soybeans, pork, beef, sugar, tea, coffee, cocoa and orange juice), industrial metals (aluminium, copper, lead, nickel and zinc), precious metals (gold, silver, platinum and palladium) and oil. These products are known as .

    Futures were invented to enable regular buyers and sellers of commodities to protect themselves against losses or to against future changes in the price. If they both agree to hedge, the seller (e.g. an orange grower) is protected from a fall in price and the buyer (e.g. an orange juiced manufacturer) is protected from a rise in price.

    Futures are contracts — contracts which are for fixed quantities (such as one ton of copper or 100 ounces of gold) and fixed time periods (normally three, six or nine months) — that are traded on a special exchange.

    Forwards are individual, contracts between two parties, traded — directly, between, two companies of financial institutions, rather than through an exchange. The futures price for a commodity is normally higher than its — the price that would be paid for immediate delivery. Sometimes, however, short-term demand pushes the spot price above the future price. This is called .

    Futures and forwards are also used by speculators — people who hope to profit from price changes.

    More recently, have been developed. These are standardized contracts, traded on exchanges, to buy and sell financial assets. Financial assets such as currencies, interest rates, stocks and stock market indexes — continuously vary — so financial futures are used to fix a value for a specified future date (e.g. sell euros for dollars at a rate of €1 for $1.20 on June 30).

    and are contracts that specify the price at which a certain currency will be bought or sold on a specified date.

    are agreements between banks and investors and companies to issue fixed income securities (bonds, certificates of deposit, money market deposits, etc.) at a future date.

    fix a price for a stock and fix a value for an index (e.g. the Dow Jones or the FTSE) on a certain date. They are alternatives to buying the stocks or shares themselves.

    Like futures for physical commodities, financial futures can be used both to hedge and to speculate. Obviously the buyer and seller of a financial future have different opinions about what will happen to exchange rates, interest rates and stock prices. They are both taking an unlimited risk, because there could be huge changes in rates and prices during the period of the contract. Futures trading is a , because the amount of money gained by one party will be the same as the sum lost by the other.

  • British English or American English?
    • aliminium
      • British English
      • American English

    • aluminum
      • American English
      • British English

  • Match the definitions with the words below.
    • 1. the price for the immediate purchase and delivery of a commodity — . . .

      The Price of Coffee is on the Rise: Who’s Really Going To Profit?

      By Jason Simpkins , Managing Editor , Money Morning • August 30, 2007

      Start the conversation

      By Jason Simpkins
      Staff Writer

      First it was the cost of a tank-full of gas for your Mercedes SUV. Then it was interest rate on your home-refi loan. But when they messed with your morning ritual – and boosted the price of your morning latte, well, that was taking things just too damned far.

      Coffee-king Starbucks Corp. (Nasdaq: SBUX) recently boosted its prices by nine cents a beverage. It was the second price increase in 10 months and has boosted the price tag of an already pricey Starbucks morning brew by about 14 cents. The prior price hike – tacked on last October – adjusted for higher labor and energy costs, while the most recent addition to prices was attributed to the big spike in the price of milk, a key component of such Starbucks’ mainstays as lattes.

      Milk prices have soared in response to – of all seemingly unrelated factors – a big uptick in the production of ethanol, a gasoline substitute that counts corn as one of its key ingredients. Well, since corn is also a key ingredient in the production of milk – it’s what dairy cows like to eat – that means there’s been a big spike in demand for that one crop. And as everyone knows, when you boost demand but keep supply relatively steady, the result is a big upswing in price.

      Though rankled a bit, most Starbucks regulars are undeterred in their admiration for the Seattle-based company, which helped transform coffee from breakfast-table beverage into an any-time-of-day treat. Indeed, some consumers can probably recite their never-wavering daily drink order – grande sugar-free vanilla skim latte—faster than they can list all the names of their kids.

      One Starbucks regular – a Baltimore-area financial advisor who stops in several mornings a week – buys herself gift cards en masse so that she won’t succumb to her organized nature and start keeping a ledger of how much money she’s spending on Starbucks drinks each month.

      “I keep getting these $25 gift cards, and even they go pretty fast,” said the financial advisor, who somewhat sheepishly requested anonymity. “But those lattes sure are good.”

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      Coffee prices have hovered between $1.00 and $1.20 per pound for the past two years, making the coffee bean one of the few commodities that hasn’t picked up steam in the current commodity boom.

      But that may be about to change.

      And in an odd irony, the Starbucks price increase may well have forced us to reassess that company as an investment opportunity. At yesterday’s closing price of $27.48, Starbucks’ shares are down $12.53 each, or a whopping 31%, from their 52-week high of $40.01. That price decline alone – coupled with the company’s tremendous track record for consistent, long-term growth – is essentially enough to make Starbucks an interesting investment opportunity.

      But let’s mix in one more ingredient, and really make this a potent portfolio pick-me-up.

      And that ingredient is China.

      Viewed through that lens, Starbucks stands as an example of an investment with a wicked one-two punch: Its business in the developed markets will continue to grow at a predictable rate, making this a stock with an attractive upside and an acceptable level of risk. But its foray into China could serve as a bit of jet fuel, enabling the company’s profit growth to rocket ahead of what analysts expect, providing you with the higher returns that typically accompany a China-focused stock, but again with the moderate risk afforded by companies whose headquarters remain in the United States.

      Contributing Editor Keith Fitz-Gerald likes to refer to this very sound strategy as “investing in companies that will profit from China,” as opposed to investing in China directly. It’s worked well for him, now we’ll show you how it can work for you.

      The ‘Three Cs:’ Coffee, China and Capital Gains

      Okay, so that’s three Cs and a G. But it’s still an intriguing picture, isn’t it?

      The demand for coffee has been picking up in recent years thanks to a worldwide surge in demand by every commodity’s new best friend, China. It’s been estimated that China’s coffee consumption was approximately 45,000 tons in 2006. But that number could jump five-fold or even six-fold to reach 300,000 tons annually by 2020.

      China, traditionally a tea-drinking nation, looks to be following a pattern similar to that seen in Japan a few years ago. After a steady climb, Japan is now the world’s third-largest coffee importer. According to the International Coffee Organization, China’s current import volume is less than a tenth of Japan’s, but coffee consumption is growing at an unparalleled rate of 10% to 15% each year. And with a population of 1.3 billion, it won’t be long before China leapfrogs Japan and Germany, and becomes the No. 2 coffee consumer in the world.

      So, which countries are going to see the most profit from this surge in demand? Well, Brazil is a given. Even though its exporters saw their profits plummet this year as the Brazilian real rose 15% against the U.S. dollar this year, Brazil remains the world’s largest producer of coffee beans.

      Brazil, no doubt, will experience a profit increase. But over time, it looks like Africa, too, will eventually present some spirited stiff transatlantic competition.

      The Coffee Reigns Down in Africa

      While Brazil produces more coffee beans, East African countries have a much-steeper tradition and a higher quality product.

      “Africa is becoming strategic: Buyers know they get quality and there’s a growing fashion for sustainable, organic coffees, over the mass production you get out of Brazil and Vietnam,” Henry Ngabirano, managing director of the Uganda Coffee Development Authority, said in an interview with Reuters.

      Uganda is one of a many African countries whose high altitude and small-scale coffee bean farms produce a higher quality coffee. That’s important, as high-quality coffee and specialty blends have become favorites in many coffee-drinking nations.

      Uganda has become one of the world’s leading producers of high quality Robusta coffee, which requires a very particular climate to cultivate. Uganda reported a 65% growth in earnings over last year, reaching $17.91 million in May, the latest figures available. In June, Uganda’s coffee earnings rose 60% compared to a year earlier, reaching $24.32 million. There was also a 31% rise in the number of 60-kilogram bags sold, according to data from the nation’s coffee board. Also, according to the board, Uganda’s coffee production is expected to increase by about 14%, to at least 2.5 million bags, by the end of 2007.

      Ethiopia is currently Africa’s largest coffee producer. Approximately 25% of its population owes its livelihood to the coffee industry. Coffee is the nation’s most profitable agricultural export, accounting for 65% to 75% of its foreign-exchange earnings, and approximately 10% of the country’s GDP.

      Earlier this year, the government of Ethiopia and Starbucks reached an agreement that will allow the country to trademark several of its beans. The purpose of the licensing agreement is to provide the country of Ethiopia with name-brand recognition by associating it with select specialty coffees. The hope is that if a particular specialty coffee proves popular, the nation that produces the crucial coffee bean will be able to command a premium price in the market.

      Kenya will produce approximately 54,000 tons of coffee in the 2007-to-2008-crop season, according to a report by the Coffee Research Foundation. And Kenya, too, is seeking to trademark its specialty coffee beans. The Coffee Board of Kenya thinks the new trade brands could be on the market within a year.

      Starbucks Sniffs Around Africa

      After reaching its licensing deal with deal with Ethiopia, Starbucks launched a plan to assist small-scale coffee producers by setting up a farmer support center to improve bean quality. It is also providing $1 million in seed money to fund business-development “micro-loans.” And that outlay is in addition to the $4.2 million that Starbucks has already supplied for social-development projects in the region.

      However, the U.S. hot-beverage giant clearly has more than philanthropic intentions for Africa. A few months ago, Dub Hay, Starbucks Senior Vice President of Coffee Procurement, announced the company would double its purchases of coffee from Africa by 2009. It’s estimated that Starbucks buys 294 million pounds of coffee a year, with only 6% coming from Africa. Starbucks wants to double Africa’s contribution to 12% during the next two years.

      Starbucks isn’t content to just buy coffee beans from Africa, however. In an interview with Reuters, Philip Gitao the Director of the East African Fine Coffees Association said, “Starbucks wants to come into Africa and get involved in production. One thing that has pushed this trend is the specialty movement – coffees grown in unique areas.”

      By assisting in the production of African coffee beans – and gaining favor with African governments and populations – Starbucks is laying a solid foundation for future trade relations. That’s not to say the coffee-producing nations of East Africa don’t have a lot to gain, however.

      Which Brings Us Back to China

      Even though East African nations are among the world’s biggest coffee exporters, China’s accelerating market has proved elusive to African growers. Uganda is the only African coffee grower currently distributing its product in China. That’s because the market in China is notoriously competitive and some African countries lack the resources to establish a legitimate presence there.

      Ethiopia’s coffee exports to China were only worth a $198,000 in 2005, a minor part of the nation’s $350 million worth of exports. That number was an improvement of more than a 100% over the two previous years, but the country has a long way to go. It needs help, and that help may be on the way.

      While African countries are struggling to gain leverage in China’s fast-growing market, Starbucks has already made headway. For eight years, it has been at the forefront of China’s developing java market, which it one day will be the biggest market outside of the United States. The franchise currently manages over 400 shops in mainland China, where coffee drinking continues to grow in popularity.

      It is Starbucks that plans to increase its purchase of African coffee beans, offer micro-financing loans to farmers, and provide social development programs. And, in addition, it will now be distributing brands of coffee licensed by African nations to its 400 coffee shops in mainland China.

      Over the next few years, East African nations will continue to push for their own avenues of global distribution. They will also continue in their efforts to boost the price of their unique coffee beans in any way they can. In the meantime, Starbucks has become a very powerful agent for African coffee production, particularly in China, the world’s fastest growing coffee market.

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