Focus on Coffee Commodity Trading, Coffee Market Tips
There is potential for coffee commodity trading observers to make some great profitable trades, after a UN food agency report pinpointed the need for global food production to increase by over 70% by 2050. Over the years, along with crude oil, coffee has been a major traded commodity, so the markets will follow closely any material change in coffee futures prices, especially when crop yields can be affected by dramatic weather changes. An important factor for this popular commodity is good rainfall, so it's not surprising that most coffee beans grow between the Tropic of Cancer and the Tropic of Capricorn.
Ideally, to achieve high crop yields growers want a temperature range of 17 to 23 centigrade, together with stable climate and encouraging soil conditions. According to a recent Cafedirect report, coffee farmers in developed countries are suffering damage to their crops. Rising temperatures are forcing coffee growers to shift to higher altitudes, and these higher temperatures encourage more disease caused by pests. Given that coffee beans are best grown with small temperature variations, clearly climate change will have a growing impact on coffee growers.
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.
Arabica, which represents about 70% green coffee bean production, is grown in warm, humid climates at altitudes above 4,000 ft, and this combined with the soil conditions helps it achieve its characteristic aromatic flavour. Arabica is mainly grown in the high altitudes of Latin America, such as Brazil, Peru, Venezuela, Ecuador and Columbia. One of the best grades of Arabica coffee in Brazil is Santos, where the beans are picked within the first 4 years of the coffee tree's life. Normally with Arabica there is a long lead time of 4-5 years, while with the lower quality Robusta, grown in South East Asia, the beans are picked after 2-3 years.
A drought can lead to coffee futures prices rising because a crop yield collapse hits supply. Lower crop yields due to higher than normal rainfall may also lead to higher prices. The crop for both current and the following year can be affected by freezing, which can be a problem particularly in Latin America for Arabica varieties in the higher altitudes. Over recent years serious freezing has occurred once in every six years in winter (June to August) months in the southern hemisphere, according to data. The coffee commodity trading observer needs to weigh up all these factors before they enter trades.
The coffee tree first produces white blossom and then over a period of two weeks to 6-9 months green cherries begin to grow and these fill out into reddish and then black cherries. Each cherry contains 2 coffee beans. Most coffee is processed using the "dry" method where the cherries are stripped off the tree and the green beans are dried and graded, ready to be shipped for roasting. A rough calculation is that about 2,000 cherries (4,000 beans) produce one pound of coffee.
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. - 23167
Ideally, to achieve high crop yields growers want a temperature range of 17 to 23 centigrade, together with stable climate and encouraging soil conditions. According to a recent Cafedirect report, coffee farmers in developed countries are suffering damage to their crops. Rising temperatures are forcing coffee growers to shift to higher altitudes, and these higher temperatures encourage more disease caused by pests. Given that coffee beans are best grown with small temperature variations, clearly climate change will have a growing impact on coffee growers.
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.
Arabica, which represents about 70% green coffee bean production, is grown in warm, humid climates at altitudes above 4,000 ft, and this combined with the soil conditions helps it achieve its characteristic aromatic flavour. Arabica is mainly grown in the high altitudes of Latin America, such as Brazil, Peru, Venezuela, Ecuador and Columbia. One of the best grades of Arabica coffee in Brazil is Santos, where the beans are picked within the first 4 years of the coffee tree's life. Normally with Arabica there is a long lead time of 4-5 years, while with the lower quality Robusta, grown in South East Asia, the beans are picked after 2-3 years.
A drought can lead to coffee futures prices rising because a crop yield collapse hits supply. Lower crop yields due to higher than normal rainfall may also lead to higher prices. The crop for both current and the following year can be affected by freezing, which can be a problem particularly in Latin America for Arabica varieties in the higher altitudes. Over recent years serious freezing has occurred once in every six years in winter (June to August) months in the southern hemisphere, according to data. The coffee commodity trading observer needs to weigh up all these factors before they enter trades.
The coffee tree first produces white blossom and then over a period of two weeks to 6-9 months green cherries begin to grow and these fill out into reddish and then black cherries. Each cherry contains 2 coffee beans. Most coffee is processed using the "dry" method where the cherries are stripped off the tree and the green beans are dried and graded, ready to be shipped for roasting. A rough calculation is that about 2,000 cherries (4,000 beans) produce one pound of coffee.
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. - 23167
About the Author:
The author, Marianna Gomes, focuses on agricultural commodities and pens articles for a helpful website ontrading commodities. Discover more about how you could benefit from coffee commodity trading tips here.
posted by X - Men @ 4:00 AM
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