Focus on Coffee Commodity Trading, Coffee Market Tips
With a UN food agency report suggesting global food production needs to rise by over 70% by 2050, coffee commodity trading offers the keen trader some great opportunities to make profitable trades. Over the years coffee has been the most actively traded commodity after crude oil, and so inevitably changes in coffee futures prices are watched closely, especially as sudden weather changes can impact on crop yields. Coffee beans are grown in most countries between the Tropic of Cancer and the Tropic of Capricorn, that is tropical and sub-tropical regions, and so good levels of rainfall are important for this popular commodity.
Climate is crucial for success in achieving good yields as well as having an optimum temperature range of between 17 and 23 centigrade and favourable soil conditions. A recent Cafedirect report showed the gradual damage caused to coffee farmers in developed countries. One clear impact of rising temperatures is coffee growers needing to move to higher altitudes. Another effect is more disease caused by pests due to the temperature rises. The climate change challenge is significant to coffee growers because the beans can only grow properly in a relatively narrow temperature range.
For those who follow coffee commodity trading the two main varieties of economic importance are Arabica and Robusta, both highly traded futures on global commodity exchanges. While the largest global coffee producer is Brazil with around 34 million (29% global output) 60-kg bags of coffee in 2007/8, and mainly Arabica, the US is the biggest world consumer and importer of coffee. In second place with a 15% world share at 17.50 m bags (Robusta) is Vietnam, while Columbia with a 11% share was third producing Arabica, and with production of 7.0 m bags in 2007/8 Indonesia was fourth largest producer.
Making up about 70% of green coffee bean production, Arabica thrives at altitudes of over 4,000 ft in warm, humid climates, which along with the right soil conditions gives the bean its characteristic aromatic flavour. Most Arabica grows in the high altitudes of countries like Columbia, Brazil, Peru, Ecuador and Venezuela. The Santos grade of Arabica in Brazil is considered one of the best, with beans picked within the first 4 years of the coffee tree's life. While Robusta beans, which are a lower grade and grown mainly in South East Asia, are picked after 2-3 years, usually with Arabica there is a longer lead time of 4-5 years.
With a drought crop yields fall and this hits supply, which can lead to coffee futures prices rising. Higher prices can also arise from lower crop yields caused by higher than normal rainfall. Freezing conditions can adversely affect crops for both current and the following year, which can be a real problem for Arabica varieties grown in the higher altitudes of Latin America. According to data, over recent years southern hemisphere growers have experienced serious freezing once in every six years in winter (June to August) months. All these various factors need to be weighed up by the coffee commodity trading observer before they commit to trades.
The first stages in coffee bean growth is the appearance of white blossom on coffee trees, followed by growth of green cherries from two weeks to 6-9 months, which eventually become reddish and then black cherries. There are two coffee beans in each cherry. The "dry" method accounts for most coffee production where cherries are stripped off the tree before the green beans are dried and graded, then shipped for roasting. Broadly speaking one pound of coffee comes from around 2,000 cherries (4,000 beans).
With your coffee commodity trading system set up and having approached a broker for an electronic trading platform, you are ready for profitable coffee trades. On ICE Futures US there is a Coffee "C" futures contract which is the Arabica benchmark, while the exchange also offers a Robusta futures contract. Alternatively, with NYSE Euronext route there are two Robusta coffee futures contracts available to trade on the London LIFFE market, along with other soft commodities like white sugar, raw sugar, cocoa and rapeseed. If you only want exposure to soft commodities without trading futures you could invest in an agricultural ETF, tracking a soft commodity index. With these derivative and investment funds you have a good choice for gaining exposure to dynamic coffee commodity trading markets. - 23305
Climate is crucial for success in achieving good yields as well as having an optimum temperature range of between 17 and 23 centigrade and favourable soil conditions. A recent Cafedirect report showed the gradual damage caused to coffee farmers in developed countries. One clear impact of rising temperatures is coffee growers needing to move to higher altitudes. Another effect is more disease caused by pests due to the temperature rises. The climate change challenge is significant to coffee growers because the beans can only grow properly in a relatively narrow temperature range.
For those who follow coffee commodity trading the two main varieties of economic importance are Arabica and Robusta, both highly traded futures on global commodity exchanges. While the largest global coffee producer is Brazil with around 34 million (29% global output) 60-kg bags of coffee in 2007/8, and mainly Arabica, the US is the biggest world consumer and importer of coffee. In second place with a 15% world share at 17.50 m bags (Robusta) is Vietnam, while Columbia with a 11% share was third producing Arabica, and with production of 7.0 m bags in 2007/8 Indonesia was fourth largest producer.
Making up about 70% of green coffee bean production, Arabica thrives at altitudes of over 4,000 ft in warm, humid climates, which along with the right soil conditions gives the bean its characteristic aromatic flavour. Most Arabica grows in the high altitudes of countries like Columbia, Brazil, Peru, Ecuador and Venezuela. The Santos grade of Arabica in Brazil is considered one of the best, with beans picked within the first 4 years of the coffee tree's life. While Robusta beans, which are a lower grade and grown mainly in South East Asia, are picked after 2-3 years, usually with Arabica there is a longer lead time of 4-5 years.
With a drought crop yields fall and this hits supply, which can lead to coffee futures prices rising. Higher prices can also arise from lower crop yields caused by higher than normal rainfall. Freezing conditions can adversely affect crops for both current and the following year, which can be a real problem for Arabica varieties grown in the higher altitudes of Latin America. According to data, over recent years southern hemisphere growers have experienced serious freezing once in every six years in winter (June to August) months. All these various factors need to be weighed up by the coffee commodity trading observer before they commit to trades.
The first stages in coffee bean growth is the appearance of white blossom on coffee trees, followed by growth of green cherries from two weeks to 6-9 months, which eventually become reddish and then black cherries. There are two coffee beans in each cherry. The "dry" method accounts for most coffee production where cherries are stripped off the tree before the green beans are dried and graded, then shipped for roasting. Broadly speaking one pound of coffee comes from around 2,000 cherries (4,000 beans).
With your coffee commodity trading system set up and having approached a broker for an electronic trading platform, you are ready for profitable coffee trades. On ICE Futures US there is a Coffee "C" futures contract which is the Arabica benchmark, while the exchange also offers a Robusta futures contract. Alternatively, with NYSE Euronext route there are two Robusta coffee futures contracts available to trade on the London LIFFE market, along with other soft commodities like white sugar, raw sugar, cocoa and rapeseed. If you only want exposure to soft commodities without trading futures you could invest in an agricultural ETF, tracking a soft commodity index. With these derivative and investment funds you have a good choice for gaining exposure to dynamic coffee commodity trading markets. - 23305
About the Author:
The author, Marianna Gomes, focuses on soft commodities and pens articles for a practical online resource ontrading commodities. Discover more about how you could benefit from coffee commodity trading tips here.
posted by Mr. Forex at
2:34 AM
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