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.
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.
The two most important varieties for followers of coffee commodity trading are Arabica and Robusta, with both strongly featured as futures on global commodity exchanges. Brazil, a major Arabica coffee producer, is also the largest global producer with around 34 million (29% global output) 60-kg bags of coffee in 2007/8. Meanwhile, the US is both the largest global consumer and importer of coffee. Vietnam comes in second place with a 15% world share at 17.50 m bags (Robusta), while in third place is Columbia with an 11% share producing Arabica, and Indonesia comes in fourth with production of 7.0 m bags in 2007/8.
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.
Drought can cause crop yields to collapse, and so lead to coffee futures prices rising. If rainfall is too high this can also lead to lower crop yields, with similar impact on prices. Freezing can impact a crop for the current year and the following year. This is usually a problem for Arabica varieties in the higher altitudes in Latin America. Statistics show that in recent years serious freezing has happened in one in every six years in winter (June to August) months in the southern hemisphere.
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.
Before you take some profitable trades as you embark on your coffee commodity trading activities, make sure you select a broker with an user friendly electronic trading platform. On ICE Futures US the Arabica benchmark is the Coffee "C" futures contract, and it is also possible to trade a futures contract for the Robusta bean variety through this global exchange. If you don't want to trade futures but still want exposure to soft commodities, you could use an agricultural ETF and track a soft commodity index. With these various derivatives and investment vehicles at their disposal, traders can gain exposure to these exotic coffee commodity trading markets. - 23229
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.
The two most important varieties for followers of coffee commodity trading are Arabica and Robusta, with both strongly featured as futures on global commodity exchanges. Brazil, a major Arabica coffee producer, is also the largest global producer with around 34 million (29% global output) 60-kg bags of coffee in 2007/8. Meanwhile, the US is both the largest global consumer and importer of coffee. Vietnam comes in second place with a 15% world share at 17.50 m bags (Robusta), while in third place is Columbia with an 11% share producing Arabica, and Indonesia comes in fourth with production of 7.0 m bags in 2007/8.
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.
Drought can cause crop yields to collapse, and so lead to coffee futures prices rising. If rainfall is too high this can also lead to lower crop yields, with similar impact on prices. Freezing can impact a crop for the current year and the following year. This is usually a problem for Arabica varieties in the higher altitudes in Latin America. Statistics show that in recent years serious freezing has happened in one in every six years in winter (June to August) months in the southern hemisphere.
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.
Before you take some profitable trades as you embark on your coffee commodity trading activities, make sure you select a broker with an user friendly electronic trading platform. On ICE Futures US the Arabica benchmark is the Coffee "C" futures contract, and it is also possible to trade a futures contract for the Robusta bean variety through this global exchange. If you don't want to trade futures but still want exposure to soft commodities, you could use an agricultural ETF and track a soft commodity index. With these various derivatives and investment vehicles at their disposal, traders can gain exposure to these exotic coffee commodity trading markets. - 23229
About the Author:
Focusing on soft commodities, the author, Marianna Gomes, writes articles to the Commodity Trading Today website, a helpful educational resource. Discover more about how you could gain from coffee commodity trading ideas here.
posted by X - Men @ 4:00 AM
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