Focus on Coffee Commodity Trading, Coffee Market Tips
There are some great opportunities for coffee commodity trading observers to make some gainful trades, after a UN agency report urged that global food production needs to rise by over 70% by 2050. With crude oil coffee has over the years been a top traded commodity, so clearly any notable change in coffee futures prices are followed closely, particularly when a dramatic change in weather can impact crop yields. Good rainfall levels are key for this popular commodity, and so you will find most coffee beans grown in countries between the Tropic of Cancer and the Tropic of Capricorn.
Key to successful crop yields is having an ideal temperature range of between 17 and 23 centigrade as well as steady climate and helpful soil conditions. Damage is being caused to coffee farmers in developed countries, according to a recent report by Cafedirect. Because of the rise in temperatures coffee growers have to move to higher altitudes. And the effect of rising temperatures is more disease caused by pests. As beans can only grow properly in a small temperature range, climate change is a major challenge to coffee growers.
The main two varieties of any real economic significance to those following coffee commodity trading are Arabica and Robusta, both actively traded futures on major world commodity exchanges. The US is the biggest world consumer and importer of coffee, while the largest producer Brazil, produced almost 34 million (29% global output) 60-kg bags of coffee in 2007/8, mainly Arabica. The next biggest producer is Vietnam with a 15% world share at 17.50 m bags (Robusta), while Columbia was third with 12.40 m bags (Arabica) and an 11% share, and Indonesia was fourth largest producer in 2007/8 with 7.0 m bags.
Arabica grows well at over 4,000 ft in warm, humid climates, and it contributes around 70% of green coffee bean production, and this along with helpful soil conditions is responsible for the bean's characteristic aromatic flavour. The high altitude countries like Columbia, Brazil, Peru, Ecuador and Venezuela are ideal for growing Arabica beans. Arguably one of the top grades of Arabica is Santos from Brazil, its beans being picked within the first 4 years of the coffee tree's life. Meanwhile, the lower grade Robusta beans from South East Asia are picked after only 2-3 years, in contrast to Arabica where normally 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 appearance of white blossom on coffee trees points to the first stages in coffee bean growth, after which over a period of between two weeks to 6-9 months green cherries appear, eventually becoming red and then black cherries. Each cherry holds two coffee beans. Most coffee production uses the "dry" method where cherries are stripped off the tree. Then the green beans are dried and graded, ready for shipping and roasting. On average about 2,000 cherries (4,000 beans) yield a pound of coffee.
You are no doubt excited to start your coffee commodity trading activities, so before you take some potentially profitable trades make sure you choose a broker with an accessible electronic trading platform. The Arabica benchmark on ICE Futures US is the Coffee "C" futures contract, and you can also get exposure to Robusta futures contracts through the exchange. Should you want to trade only soft commodities but not as futures, you have the option to use an agricultural ETF which tracks a soft commodity index. Using these various derivative and investment vehicles, the trader has some good options for gaining exposure to these exciting coffee commodity trading markets. - 23208
Key to successful crop yields is having an ideal temperature range of between 17 and 23 centigrade as well as steady climate and helpful soil conditions. Damage is being caused to coffee farmers in developed countries, according to a recent report by Cafedirect. Because of the rise in temperatures coffee growers have to move to higher altitudes. And the effect of rising temperatures is more disease caused by pests. As beans can only grow properly in a small temperature range, climate change is a major challenge to coffee growers.
The main two varieties of any real economic significance to those following coffee commodity trading are Arabica and Robusta, both actively traded futures on major world commodity exchanges. The US is the biggest world consumer and importer of coffee, while the largest producer Brazil, produced almost 34 million (29% global output) 60-kg bags of coffee in 2007/8, mainly Arabica. The next biggest producer is Vietnam with a 15% world share at 17.50 m bags (Robusta), while Columbia was third with 12.40 m bags (Arabica) and an 11% share, and Indonesia was fourth largest producer in 2007/8 with 7.0 m bags.
Arabica grows well at over 4,000 ft in warm, humid climates, and it contributes around 70% of green coffee bean production, and this along with helpful soil conditions is responsible for the bean's characteristic aromatic flavour. The high altitude countries like Columbia, Brazil, Peru, Ecuador and Venezuela are ideal for growing Arabica beans. Arguably one of the top grades of Arabica is Santos from Brazil, its beans being picked within the first 4 years of the coffee tree's life. Meanwhile, the lower grade Robusta beans from South East Asia are picked after only 2-3 years, in contrast to Arabica where normally 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 appearance of white blossom on coffee trees points to the first stages in coffee bean growth, after which over a period of between two weeks to 6-9 months green cherries appear, eventually becoming red and then black cherries. Each cherry holds two coffee beans. Most coffee production uses the "dry" method where cherries are stripped off the tree. Then the green beans are dried and graded, ready for shipping and roasting. On average about 2,000 cherries (4,000 beans) yield a pound of coffee.
You are no doubt excited to start your coffee commodity trading activities, so before you take some potentially profitable trades make sure you choose a broker with an accessible electronic trading platform. The Arabica benchmark on ICE Futures US is the Coffee "C" futures contract, and you can also get exposure to Robusta futures contracts through the exchange. Should you want to trade only soft commodities but not as futures, you have the option to use an agricultural ETF which tracks a soft commodity index. Using these various derivative and investment vehicles, the trader has some good options for gaining exposure to these exciting coffee commodity trading markets. - 23208
About the Author:
The author, Marianna Gomes, covers soft commodities and pens articles for a practical website ontrading commodities. Discover more about how you could benefit from coffee commodity trading tips here.
posted by X - Men @ 2:32 AM
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