Top 10 Best Commodity ETF Plays YTD

February 20, 2014

At No. 3 and No. 2 there are two coffee ETNs, with the iPath Pure Beta Coffee ETN (CAFE | B-95) at No. 2 on gains of nearly 48 percent year-to-date.

After bleeding roughly two-thirds of value in a two-year period, coffee prices are now rising. The boost comes from weather concerns in coffee-producing Brazil at a time when demand from key importers such as Europe is on the rise.

Arabica coffee, for instance, is up 55 percent year-to-date, according to HardAssetsInvestor.com data. Robusta coffee is up 18 percent in the same period.

What's more, the coffee market is in contango, costing investors about 10.33 percent annualized to roll front-month coffee contracts, according to our data.

CAFE tracks an index of a single coffee futures contract whose expiration date is chosen to mitigate contango in an optimized exposure. The ETN, which is backed by Barclays Capital, has under $11 million in assets, and costs investors 0.85 percent in expense ratio plus an average trading spread of 28 basis points.

At No. 2, iPath Dow Jones-UBS Coffee Total Return ETN (JO | B-92) is up 52.21 percent year-to-date.

JO tracks a single, front-month coffee futures contract. It and CAFE are the only two ETPs to tap exclusively into the coffee market. JO is larger and cheaper than competing CAFE.

By design, JO serves up direct exposure to the short-term supply and demand dynamics of the coffee market, which are currently reflecting inventory concerns amid supply shortages. The $184 million ETN, also backed by Barclays, comes with an all-in cost of about 89 basis points.

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