A CRISIS OF FINANCING COMMODITIES. WHAT'S THE IMPACT ON PRODUCTION AND CONSUMER DEMAND?

A crisis of finPopular real estate entrepreneur insists US is still suffering through a 'difficult' market

EXCERPT

Sunny skies aren’t shining across America’s real estate market just yet, according to one of the nation’s top experts and "Shark Tank" entrepreneurs.

"No one wants to move and [there are] fewer houses to choose from at higher rates. So it's difficult for homebuyers," Corcoran Group founder Barbara Corcoran said on "Mornings with Maria," Thursday.

Mortgage rates are moving down "by a fraction of a point," Corcoran pointed out while reacting to 30-year fixed rates falling to 6.96% – the lowest level in six weeks. As of Thursday, the 15-year fixed loan rate was at 6.21%.

However, in Corcoran’s view, rates aren’t low enough for sellers to list their homes. Redfin reported in December that more than half (54.5%) of homes on the market had been listed for more than 60 days, with many deemed too expensive by would-be buyers.

https://www.foxbusiness.com/media/popular-real-estate-entrepreneur-insists-us-still-suffering-through-difficult-market #FoxBusiness

ancing.

Let's look at coffee as an example.

Producers have the coffee, but the banks won't finance importers and big roasters, because it has become too risky.  That negatively affects demand, and the investment funds pull out, and the market crashes.

Yes, extreme price spikes in the Arabica coffee market often lead to demand destruction, which then triggers a price correction. Here's how the cycle typically unfolds:

1. Price Surge Causes Demand Destruction

When prices rise too high, coffee roasters and buyers reduce their purchases or switch to cheaper alternatives (like Robusta coffee).

Consumers face higher prices for coffee, leading to lower consumption or shifts to lower-cost blends.

Some buyers, particularly smaller roasters or traders, may exit the market due to financing constraints.

2. Liquidity Crisis Freezes the Market

If banks and lenders refuse to finance purchases due to extreme prices and high risks, market liquidity dries up.

Some buyers default on contracts, and trading activity declines.

Large roasters may delay purchases, betting on a future price drop.

3. Oversupply Develops as Buyers Pull Back

Farmers and exporters, expecting high prices, continue to harvest and ship coffee.

With fewer buyers in the market, coffee stockpiles build up in warehouses.

The sudden drop in demand leads to an imbalance between supply and consumption.

4. Price Correction Follows

As stockpiles increase and buyers hold back, prices begin to fall.

Panic selling may occur as traders and producers offload coffee at lower prices to avoid further losses.

Speculative traders who drove up prices may exit their positions, accelerating the decline.

5. Market Stabilizes at a Lower Price

Once prices drop to a more sustainable level, demand returns as roasters and buyers re-enter the market.

If the price falls too low, farmers may reduce production, eventually tightening supply again.

Historical Examples of This Cycle

1. 1994 Frost Crisis → Prices hit $2.75/lb, causing demand destruction, and fell back to $1.00/lb within two years.

2. 1997–1999 Speculative Bubble → Prices surged to $3.00/lb, then crashed below $1.00/lb.

3. 2010–2011 Price Spike → Hit $3.08/lb, but by 2013 had corrected below $1.50/lb.

4. 2021–2022 Supply Chain Rally → Prices hit $2.60/lb, but dropped below $1.50/lb by 2023.

Conclusion

Yes, demand destruction inevitably leads to a price correction in the Arabica coffee market.

The key takeaway is that commodity markets are cyclical, and extreme price spikes usually collapse under their own weight when liquidity vanishes and buyers pull back.