Coffee is one of the most frequently traded commodities in the world.
While coffee production occurs in many countries around the world, Brazil is the major producer followed by Vietnam, Indonesia and Columbia. The biggest consumer of coffee is the U.S. followed by Germany and Italy.
There are two types of coffee beans, Arabica and Robusta. Arabica beans are considered more flavorful and therefore command a premium in the market. Robusta beans tend to be bitter and less palatable but have a 50% higher concentration of caffeine than the Arabica bean. Robusta beans are sold for about 70% of the price of Arabica and are therefore more commonly traded by the big four coffee companies, Kraft, Nestlé, Procter and Gamble and Sara Lee who purchase approximately 50% of all coffee worldwide.
Factors that can influence the price of coffee are:
- Brazil is the major producers of the Arabica bean. Although the bean commands a higher price, it has left Brazil exposed to competition from the cheaper coffee bean Robusta. This has allowed Vietnam to develop a strong coffee industry around the Robusta bean and become the second largest producer in the world.
- As stated above, four major corporations dominate the Robusta coffee market preferring Robusta beans to Arabica beans solely based on price.
- Fair trade coffee is gaining popularity. Fair trade guarantees coffee growers a set price prior to harvest. This had led to privately negotiated deals with co-ops around the world.
- Studies have shown many health benefits of drinking coffee including reducing the risk of Alzheimer’s, cirrhosis of the liver and gout as well as others. Scientists are still discovering all the applications of coffee.
- Coffee is a key cash crop for developing countries. For example, coffee accounts for 60% of all Ethiopia’s exports. It is believed that more than 100 million people in these countries depend on coffee as their primary source of income.
Coffee (CFE) Contract Details:
| Currency | Price per | Standard Contract Size | Pip Value / contract |
|---|---|---|---|
| USD cents | Pound | 37,000 pounds | USD 3.75 |
Trading hours: Coffee trades daily Monday to Friday from 09:15 GMT and closes at 18:25 GMT. Spreads are usually higher during out-of-business hours.
For more information on coffee and other related trading products, go to our blog website, forex.info.
