Coffee Trading, Commodities & Markets

Coffee : Commodities | Prices | Futures | Beans Traded | Grades | Further Reading

Coffee is also one of the most frequently traded commodities in the world. It is not the second most traded, as is commonly thought. This is a myth. This often repeated fact seems to derive from coffee being the second most valuable primary export of developing countries, behind oil.

Ready to start trading? Claim £20 welcome bonus at Plus500 now!

Important: Your capital may be at risk. CFD services are suitable for experienced traders only.

Coffee Commodities

Brazil leads the way in exports of green coffee beans, which is the bean that is used in the production of coffee. It exported 2.79 million tonnes in 2008, vastly overshadowing even the second biggest exporter of coffee commodities, Vietnam. The top 10 exporters of coffee produce around 8 million tonnes a year, depending on variants such as weather, finances and demand. The biggest consumer of coffee is the United States, followed by other major, developed nations such as Germany and Italy. A number of more developed countries also re-export their coffee, however statistics for this are unclear, as the coffee may be raw, or it may have been processed, which would mean it is no longer a coffee commodity. Cafés and coffee houses are increasingly common in developed countries, especially with the rise of large coffee chains, such as Starbucks. Chains and private cafés account for about 40% of the market share, with 60% being sold in supermarkets and other private retailers.

Coffee Commodity Prices

The major coffee markets, like many commodities, are based in London and New York, with most coffee being traded on the New York Mercantile Exchange (NYME) and London’s NYSE Liffe. It is traded, like many commodities, in US Dollars ($) and is measured by the pound. The standard coffee commodity prices quoted would be would be in dollars per pound ($/lb). A single contract on the New York exchange is traded for 37,500 pounds. Coffee futures are also traded on Brazil’s BM&F Bovespa (BOVESPA), the Ethiopia Commodity Exchange (ECX) and the Singapore Commodity Exchange (SECOM) amongst others.

Coffee Futures

The London and New York exchanges are where coffee futures contracts and other trade agreements take place. However, large companies tend not to purchase coffee on the commodity market, with Starbucks preferring to purchase its coffee through private contracts that last for a number of years.

Beans Traded On Coffee Markets

A number of different types of coffee can be traded, making it different to many commodities, especially hard commodities. There are two main varieties of coffee bean which are traded internationally, and these are Arabica and Robusta. Robusta beans are sold for 70% of the price of Arabica beans, and therefore they are more commonly traded by the “big four” coffee companies, who purchase approximately 50% of all coffee worldwide. These four companies are Kraft, Nestlé, Procter and Gamble, and Sara Lee. The price disparity between the two has decreased in recent years, as large companies began purchasing only Robusta beans, which drove up demand and decreased demand for the Arabica variety. Despite this, Arabica coffee is still more commonly produced.

National commodity exchanges in countries with a long history of coffee cultivation often have many more varieties of coffee available for commodity trading. The Ethiopia Commodity Exchange, for example, has tens of varieties available, many of them having been developed over centuries.

Coffee Grades

There are also variations on price and quality depending on which country the coffee was harvested. These are known on the exchange as ‘deliverable grades’. A certificate is given to each country’s coffee based on the grade of the beans and how the coffee tastes. A number of countries, such as Mexico, Kenya and Costa Rica, are established as the ‘basis’. Countries with a higher grade are sold at a premium, such as Costa Rican coffee, and countries with a lower grade are sold at a discount, such as Venezuelan, Burundi and Indian varieties.

Ready to Start Trading Coffee Commodities?

We recommend Plus500, who offer…

Plus500
www.plus500.com
  • Up to 1:50 leverage
  • £20 welcome bonus
  • Smooth web-based, Windows, iPad & iPhone trading

… when you open a free demo account. or start trading for real.

Important: Your capital may be at risk. CFD services are not suitable for experienced traders only.

Further Reading