Hello everyone,
I’m very happy that Part 1 of my article gained your attention. Whether you agreed or disagreed, it has motivated me to continue sharing my thoughts about the coffee supply and demand situation.
Part 2: Summary, Analysis, and Conclusions
As I introduced myself earlier, I am a farmer. Therefore, everything I present here comes from the perspective of a farmer who has experienced the highs of good prices and the lows when the prices are bad. What I’m sharing with you is more of a personal account of my experiences rather than a professional analysis or forecasting.
Please note that the terms I use, like analysis and prediction, refer to my own personal summaries, analyses, and predictions, and they don’t imply that I am an analyst or forecaster.
It was surprising during the recent World Cup when two major teams, Brazil and Argentina, played so well but had to go home early. So many news stories, expert opinions, and analyses were shared, but in the end, Spain won the cup – proving that life doesn’t always go as expected.
When Hurricane Katrina hit New Orleans in late August and early September 2005, news flooded in: New Orleans, a city where 70% of the area is below sea level, is one of the main coffee import hubs for the U.S. Many warehouses where coffee is stored and processed were located there, and seawater levels could rise up to 8 meters. All of this was true, without exaggeration.
What would you, as a buyer or seller, or a speculator looking for an opportunity, do in this situation? The answer is obvious: buy as much as possible. If you haven’t sold yet, you’d wait until the right time.
In business, this is a golden opportunity that should be seized. Farmers, on the other hand, may hold onto their stock and wait to sell until the crisis peaks. If they’re lucky, their spouse might praise them for making the right decision, not just knowing when to fertilize but also when to seize the opportunity.
Indeed, after such events, coffee prices rose because people, especially roasters, were worried about damaged goods and potential delays in delivery. They feared that prices would rise even further. But have you ever wondered: Who was crazy enough to sell to us at that time? The people I thought were crazy for selling actually had very good reasons:
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They had already bought at lower prices, and now that the opportunity to sell had arrived, they made a profit and sold for safety (this action is formally known as Take Profit).
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They had daily updates and knew that the coffee warehouses were built on high ground above 2 meters, so even with some storm damage, the real damage wouldn’t be that severe.
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They continuously updated and analyzed information, adjusting their predictions, and set high selling prices, knowing they could buy back at the same price to pull the market and create panic, making it feel like the “sky is falling” for others.
They monitored the storm’s progress until it weakened and then adjusted their strategy to sell. Once they saw that prices would no longer rise, or the real situation couldn’t support the price increase, they switched to shorting the market.
Later, reports confirmed that while the hurricane damage was substantial, the coffee warehouses in New Orleans weren’t heavily affected, and other sources of coffee would temporarily compensate for the disruption. Prices deflated like a balloon losing air.
People rushed to sell, and the buying and selling positions reversed. The sellers from the previous day became the buyers of today.
I wanted to share this real-life example with you to show that while we all analyze and predict, the outcomes can vary greatly, and the differences in what we gain or lose are huge. Like life itself, everyone can be wise, but sometimes we all make mistakes. Whether you like it or not, whether you accept it or not, we cannot ignore the impact of the flood of both fake and real information that surrounds us daily. Success and failure depend on how we handle this information, and this principle holds true in many areas of life.
In my next post, I will talk about how “Fake information, but real impact” and “Stop Loss” (cutting losses) have disastrous consequences.