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How to invest in coffee in India

3 ways in India to jolt your portfolio with this ubiquitous — though volatile — commodity.

Invest in coffee through a broker Compare online brokers

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Coffee is the second-most-traded commodity in the world after crude oil. Integrated into our daily routines, it’s a staple on countless street corners in India — and global demand has increased considerably in recent years. But it can be a complex, nuanced and volatile commodity. To maximise your returns, do your research on how and where it’s grown while understanding inherent investment risks associated with your daily bean.

Each of the three investment options available for this tangible commodity comes with risk, given you’re taking a bet as to how much coffee will sell for.

Buy shares in coffee companies

One of the conventional ways for investing in the coffee industry is purchasing stock in a company that sells or is involved in the production of this commodity, though coffee growers and importers are much more fragmented than some other commodities.

Investing in more than one company is a safer option than putting all your eggs in one basket. Another way to reduce your risk is by buying stock in a company that sells coffee in addition to other products.

In the case of coffee, here are some companies listed on Indian stock exchanges like the National Stock Exchange of India (NSE) and the Bombay Stock Exchange (BSE), which are categorised under the coffee subsector or have business operations in the coffee segment:

  • Bombay Burmah Trading Corporation Ltd (BBTC)
  • CCL Products (India) Ltd (CCL)
  • Joonktollee Tea & Industries Ltd (JOONKTOLL)
  • Tata Coffee Ltd (TATACOFFEE)
  • Tata Consumer Products Ltd (TATACONSUM)
  • Peria Karamalai Tea and Produce Company Ltd (PKTEA)

Shares of stock are a simple way to access the market, because you can purchase them through an online broker or financial adviser.

Pros

  • Build and tailor your own portfolio.
  • Simple and accessible investing.

Cons

  • Unpredictable growing and manufacturing factors make for volatile stocks and prices.
  • Risk of losing your investment can be high.

Buy coffee ETFs

Exchange-traded funds (ETFs) are a type of investment made up of a collection of commodities, equities, bonds or currencies, allowing for diversification across an entire industry by tracking its overall success.

Commodity-based coffee ETFs operate with an arbitrage mechanism designed to allow investors to directly track the performance of the coffee market as a whole.

Unfortunately, there is no coffee ETF listed in Indian stock markets at the time of writing. If you are interested in investing in coffee ETFs, you need to turn your attention to international markets such as the US stock market. Please note that you will also need a brokerage account that offers access to US or global stocks.

In the US, there is only one ETF that is exclusively invested in coffee is currently available:

  • iPath Dow Jones-UBS Coffee Subindex Total Return ETN (JO), which tracks an index of futures contracts on the price of coffee.

Pros

  • Instant diversification across the coffee industry.
  • Investments come at a low price, with lower risk than stocks in a single company.
  • Single transaction adds an entire market to a portfolio.
  • Simple, low-maintenance way to invest.

Cons

  • The collection is decided for you, meaning you relinquish some of your control.
  • Though diverse, ETFs are not immune to volatility.

Purchase coffee futures

Futures are one of the most direct ways to trade a commodity, though they’re traded on different exchanges than stocks are, so you’ll need a brokerage account that supports futures trading and you’ll probably access a different part of your trading platform than you would with stocks or options. When you purchase a future, you buy a contract to purchase a commodity — in this case coffee — at a future date at a specified price. These contracts come with an expiration date.

Investing in coffee futures essentially means betting on what the coffee will sell for at a specific date and place. For instance, the Coffee C contract offers trades five times a year and covers bean deliveries from 19 countries. Each contract is for 37,000 pounds of coffee — not a small investment. Those who grow coffee beans or buy coffee beans can use futures to lock in prices, but futures can also be traded by investors and speculators.

Futures can be extremely volatile and are far riskier than other investment options. They also offer the greatest potential return if you get the timing and price movement right to see a profit on your investment.

Pros

  • Because of lot size, small price moves of as little as 1% can mean strong gains.
  • Investing is simple and accessible.

Cons

  • Futures are volatile — you can’t predict with certainty how prices will fluctuate.
  • Risk of losing your investment is high, as small moves against you can spell big losses.
  • Failure to exercise futures prior to expiration renders them worthless.

Compare these providers for access to coffee stocks and more

Name Product Number of stocks CFDs Shares Available Markets Link
Axis Direct
All NSE/BSE listed stocks
No
Yes
IN
Go to site
More info
Get brokerage cashback of up to Rs 500 on trades done online through Axis Direct website, Swift Trade, or Mobile app. Grow your investment portfolio and maximise your gains with AxisDirect’s 3-in-1 demat, trading and savings account.
TradeSmart
All NSE/BSE listed stocks
No
Yes
IN
Go to site
More info
CFD Service. Your capital is at risk.
Achieve your financial objectives and trade various financial instruments with India’s leading discount broker.
Saxo Bank
19,000+
Yes
Yes
AU, CN, CZ, DK, ES, FR, TW, HK, IT, HU, SA, NE, NO, PL, RU, SG, CH, UK, JP
Go to site
CFD service. Your capital is at risk.
More info
CFD Service. Your capital is at risk.
Trade 40,000+ financial instruments at market-leading prices with this powerful yet intuitive trading platform.
Zacks Trade
Access to global markets
No
Yes
US, AU, ES, FR, HK, IT, NO, RU, SG, CH, UK, JP, MX, DE, CA, AUT, BEL, NL, SE
Go to site
More info
CFD Service. Your capital is at risk.
Trade stocks, bonds, ETFs, options, and more on 90+ international exchanges. Offers customisable trading platforms with over 120 technical indicators for your charting needs.
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Compare up to 4 providers

What are the risks of investing in coffee?

The price of coffee fluctuates depending on a range of factors, many of which are out of our control, resulting in a volatile and unpredictable commodity:

  • Weather conditions in the countries producing the coffee.
  • Economic and political factors affecting coffee-producing countries.
  • Fluctuations in foreign currency exchange rates.
  • Changing trade regulations and restrictions.
  • Changes in the supply and demand of coffee.

Bottom line

You can invest in coffee by purchasing stock in coffee companies, coffee ETFs or coffee futures. But the price of your daily bean can be unpredictable given growing and manufacturing variables.

Before purchasing this commodity, compare your investing options across trading platforms and other tangible goods.

Frequently asked questions

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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