Trade Idea – Commodities – Bearish bets on coffee hit record high 26th November 2015
Coffee prices to remain depressed
• Last week the BRL staged a 3% rally as the incumbent Brazilian President, Dilma Rousseff, won a political victory aimed at narrowing the country’s growing budget deficit. The strengthening of the BRL sent the price of Arabica coffee soaring 8% from 23 month lows (see Figure 1, Source: Bloomberg) and partially reversed a downward trend that has plagued the soft commodity since the end of last year. Brazil is the largest global exporter of Arabica coffee and the recent weakening of its currency has, until September, significantly weighed on the coffee price[1]. In coming months, we expect support from favourable currency movements to fade and a strong coffee supply outlook for 2016/17 crop year to weigh on price, benefiting those investors with tactical short exposure to coffee.
Speculative coffee positioning reaches record low
• According to the Commodity Futures Trading Commission (CFTC), short bets on coffee swelled to the highest level on record in the week to Nov 17 (see figure 2), reflecting the bearish sentiment that has dominated coffee trading until last week’s recovery. We believe that bearish sentiment will reassert and help to push coffee prices lower as soon as BRL strength abates. The Brazilian economy is currently under considerable duress as stagflation and political turmoil weigh on the nation’s prospects. Therefore, we believe that the optimism that has fuelled the recent BRL appreciation is fragile and will likely fade as the economy slips further into recession and political uncertainty persists.
Favourable supply outlook
• The Brazilian harvest for 2015/16 is almost complete and despite the 2014 drought prompting forecasts of a large fall in production, output has only fallen 3% YoY (Source: United States Department of Agriculture). Looking ahead to next year, good rain in key producing regions is helping the flowering process of Brazilian coffee trees which should aid coffee cherry development and in turn increase the likelihood of a strong yield from the 2016/17 harvest.
• Elsewhere, Columbia and Honduras have seen production grow 40% and 46% respectively over the past five years as tree renovation programmes, aimed at combatting coffee rust (disease that affects coffee plantations), pay considerable dividends (see Figure 3). Given that both are top five global exporters of coffee (third and fifth respectively) this trend will likely be another source of pressure on coffee prices in the near future.
Investors wishing to express the investment views outlined above may consider using the following ETF Securities ETPs:
Coffee • ETFS Coffee (COFF) • ETFS 2x Daily Long Coffee (LCFE) • ETFS 1x Daily Short Coffee (SCFE) • ETFS 3x Daily Long Coffee (3CFL) • ETFS 3x Daily Short Coffee (3CFS) • ETFS EUR Daily Hedged Coffee (ECOF) • Swiss Franc Daily Hedged Coffee (CCOF)
The complete ETF Securities product list can be found here. [1] Brazilian coffee suppliers increase output as a weaker BRL means that their produce become cheaper on international US Dollar denominated markets.
Disclaimer Title Important Information
Disclaimer Text This communication has been issued and approved for the purpose of section 21 of the Financial Services and Markets Act 2000 by ETF Securities (UK) Limited (“ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (the “FCA”). The information contained in this communication is for your general information only and is neither an offer for sale nor a solicitation of an offer to buy securities. This communication should not be used as the basis for any investment decision. Historical performance is not an indication of future performance and any investments may go down in value. This document is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering of shares or securities in the United States or any province or territory thereof. Neither this document nor any copy hereof should be taken, transmitted or distributed (directly or indirectly) into the United States. This communication may contain independent market commentary prepared by ETFS UK based on publicly available information. Although ETFS UK endeavours to ensure the accuracy of the content in this communication, ETFS UK does not warrant or guarantee its accuracy or correctness. Any third party data providers used to source the information in this communication make no warranties or representation of any kind relating to such data. Where ETFS UK has expressed its own opinions related to product or market activity, these views may change. Neither ETFS UK, nor any affiliate, nor any of their respective, officers, directors, partners, or employees accepts any liability whatsoever for any direct or consequential loss arising from any use of this publication or its contents. ETFS UK is required by the FCA to clarify that it is not acting for you in any way in relation to the investment or investment activity to which this communication relates. In particular, ETFS UK will not provide any investment services to you and or advise you on the merits of, or make any recommendation to you in relation to, the terms of any transaction. No representative of ETFS UK is authorised to behave in any way which would lead you to believe otherwise. ETFS UK is not, therefore, responsible for providing you with the protections afforded to its clients and you should seek your own independent legal, investment and tax or other advice as you see fit. While this communication is made by ETFS UK, certain content has been produced and provided for ETFS UK by Roubini Global Economics, LLC (“RGE”). RGE is an independent, unaffiliated third party to ETFS UK. No forwarding, reprinting, republication or any other redistribution of this content is permissible without the express consent of RGE and ETFS UK. RGE and ETFS UK reserve the right to enforce their respective copyrights and pursue any such other action as they deem appropriate in respect of any such unauthorised use, republication or redistribution of this communication.
Franklin MSCI World Catholic Principles UCITSETF USD Capitalisation (FLXA ETF), ISIN IE000AZOUN82, försöker spåra MSCI World Select Catholic Principles ESG Universal och Low Carbon-index. MSCI World Select Catholic Principles ESG Universal och Low Carbon Index spårar stora och medelstora värdepapper från utvecklade länder över hela världen. De utvalda företagen screenas enligt deras koldioxidexponering, deras ESG-profil (miljö, social och styrning) och katolska principer. Som ett resultat är företag som är involverade i vapen, hasardspel, vuxenunderhållning, abort, preventivmedel, stamcellsforskning och djurförsök uteslutna.
Den börshandlade fondens TER (total cost ratio) uppgår till 0,27 % p.a. Franklin MSCI World Catholic Principles UCITSETF USD Capitalization är den enda ETF som följer MSCI World Select Catholic Principles ESG Universal och Low Carbon-index. ETFen replikerar det underliggande indexets prestanda genom fullständig replikering (köper alla indexbeståndsdelar). Utdelningarna i ETFen ackumuleras och återinvesteras.
Franklin MSCI World Catholic Principles UCITSETF USD Capitalization är en liten ETF med tillgångar på 34 miljoner euro under förvaltning. Denna ETF lanserades den 24 april 2024 och har sin hemvist i Irland.
Det betyder att det går att handla andelar i denna ETF genom de flesta svenska banker och Internetmäklare, till exempel DEGIRO, Nordnet, Aktieinvest, SAVR och Avanza.
2024 was a landmark year for bitcoin, solidifying its role as a fully institutionalised asset class.
Institutional inflows into physical bitcoin exchange-traded products (ETPs) reached nearly $35 billion globally, signalling a major shift in how traditional investors view crypto. As bitcoin continued to enhance portfolios’ risk-return profiles, more institutional investors followed suit, reshaping the financial landscape.
Looking ahead, 2025 promises to bring exciting developments across the crypto ecosystem. Here are the top five crypto trends to watch.
Fear of being left behind
The era of bitcoin as a niche investment is over. Institutional adoption is creating a ripple effect, forcing hesitant players to reconsider. Portfolios with bitcoin allocations are consistently outperforming those without, highlighting its growing importance.
Source: Bloomberg, WisdomTree. From 31 December 2013 to 30 November 2024. In USD. Based on daily returns. The 60/40 Global Portfolio is composed of 60% MSCI All Country World and 40% Bloomberg Multiverse. You cannot invest directly in an index. Historical performance is not an indication of future performance and any investment may go down in value.
With bitcoin’s ability to noticeably improve portfolios’ risk-return profiles, asset managers face a clear choice: integrate bitcoin into multi-asset portfolios or risk falling behind in a rapidly evolving financial landscape. In 2025, expect the competition to heat up as clients demand exposure to this powerhouse cryptocurrency.
Expanding crypto investment options
In 2024, regulatory breakthroughs opened the doors for physical bitcoin and ether ETPs in key developed markets. This marked a critical step towards making cryptocurrencies mainstream, providing seamless access to institutional and retail investors alike.
Figure 2: Global physical crypto ETP assets under management (AUM) and 2024 net flows
Source: Bloomberg, WisdomTree. 02 January 2025. Historical performance is not an indication of future performance and any investment may go down in value.
In 2025, this momentum is expected to accelerate as the crypto regulatory environment becomes more friendly in the United States and as key developed markets follow Europe’s lead and approve ETPs for altcoins such as Solana and XRP. With their clear utility and growing adoption, these altcoins are strong candidates for institutional investment vehicles.
This next wave of altcoin ETPs will expand the diversity of crypto investment opportunities and further integrate cryptocurrencies into the global financial system.
The maturing of Ethereum’s layer-2 ecosystem
Ethereum’s role as the backbone of decentralised finance (DeFi), non-fungible tokens (NFTs), and Web3 is unmatched, but its scalability challenges remain a hurdle. Layer-2 solutions—technologies such as Arbitrum and Optimism—are transforming Ethereum’s scalability and usability by enabling faster, cheaper transactions.
In 2025, Ethereum’s recent upgrades, such as Proto-Danksharding (introduced in the ‘Dencun’ upgrade), will drive layer-2 adoption even further. Innovations like Visa’s layer-2 payment platform leveraging Ethereum for instant cross-border transactions will underscore the platform’s evolution.
Expect Ethereum’s layer-2 ecosystem to power real-world use cases ranging from tokenized assets to decentralised gaming, positioning it as the infrastructure of a truly scalable digital economy.
Stablecoins: bridging finance and blockchain
Stablecoins are becoming indispensable to the global financial system, offering the stability of traditional assets with the efficiency of blockchain. Platforms such as Ethereum dominate the stablecoin landscape, hosting stablecoin giants Tether (USDT) and USD Coin (USDC), which facilitate billions in daily transactions.
Figure 3: Key stablecoin chains
Source: Artemis Terminal, WisdomTree. 05 January 2025. Historical performance is not an indication of future performance and any investment may go down in value.
As we move into 2025, stablecoins will increasingly interact with blockchain ecosystems such as Solana and XRP. Solana’s high-speed, low-cost infrastructure makes it ideal for stablecoin payments and remittances, while XRP Ledger’s focus on cross-border efficiency positions it as a leader in global settlements. With institutional adoption rising and DeFi applications booming, stablecoins will serve as the backbone of a seamless, interconnected financial ecosystem.
Tokenization: redefining ownership and revolutionising finance
Tokenization is set to redefine how we think about ownership and value. By converting tangible assets like real estate, commodities, stocks, and art into digital tokens, tokenization breaks down barriers to entry and creates unprecedented liquidity.
In 2025, tokenization will expand dramatically, empowering investors to own fractions of high-value assets. Platforms such as Paxos Gold and AspenCoin are already showcasing how tokenization can revolutionize markets for gold and luxury real estate. The integration of tokenized assets into DeFi will unlock new financial opportunities, such as using tokenized real estate as collateral for loans. As tokenization matures, it will transform industries ranging from private equity to venture capital, creating a more inclusive and efficient financial system.
For the avoidance of any doubt, tokenization complements crypto by expanding the use cases of blockchain to include real-world applications.
Looking ahead
2025 is set to be a defining year for crypto, as innovation, regulation, and adoption converge. Whether it is bitcoin cementing its position as a portfolio staple, Ethereum scaling for mainstream use, or tokenization unlocking liquidity in untapped markets, the crypto ecosystem is poised for explosive growth. For investors and institutions alike, the opportunities have never been clearer or more compelling.
This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
Fidelity Sustainable Research Enhanced Global Equity UCITSETFAcc (FGLR ETF) med ISIN IE00BKSBGV72, är en aktivt förvaltad ETF.
Denna ETF investerar i aktier från utvecklade marknader över hela världen. Värdepapper väljs ut enligt hållbarhet och grundläggande kriterier.
Den börshandlade fondens TER (total cost ratio) uppgår till 0,25 % p.a. Fidelity Sustainable Research Enhanced Global Equity UCITSETFAcc är den enda ETF som följer Fidelity Sustainable Research Enhanced Global Equity-index. ETFen replikerar det underliggande indexets prestanda genom fullständig replikering (köper alla indexbeståndsdelar). Utdelningarna i ETFen ackumuleras och återinvesteras.
Fidelity Sustainable Research Enhanced Global Equity UCITSETFAcc är en liten ETF med tillgångar på 45 miljoner euro under förvaltning. Denna ETF lanserades den 27 maj 2020 och har sin hemvist i Irland.
Investeringsmål
Fonden strävar efter att uppnå långsiktig kapitaltillväxt från en portfölj som huvudsakligen består av aktier i företag med säte globalt.
Det betyder att det går att handla andelar i denna ETF genom de flesta svenska banker och Internetmäklare, till exempel DEGIRO, Nordnet, Aktieinvest, SAVR och Avanza.