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Coffee Trading

Coffee Trading Defined and Explained

Coffee is the second most commonly traded commodity in the world (measured by monetary volume), trailing only crude oil as a source of foreign exchange to developing countries, according to the International Coffee Organization. While production and consumption of many commodities tend to rise and fall based on price, shifts in coffee supply and demand are not so prone to price changes as people continue to look for their morning cup of coffee at whatever the price is. An important distinction for coffee futures traders is that two different types of coffee are traded on the world's exchanges.

Coffee Prices & Rates

Arabica coffee futures and options are traded in New York on the Intercontinental Exchange (ICE, formerly the New York Board of Trade).

The size of the Coffee "C" futures contract is 37,500 pounds.
Coffee commodity trading is now done electronically.
Coffee futures prices are quoted in cents per pound, and the minimum price fluctuation is 5/100 cent/pound, equivalent to $18.75 per contract.
A 1-cent change in price equals $375.
The coffee futures contract months are March, May, July, September and December.
The contract prices physical delivery of exchange-grade green beans from one of 19 countries of origin in a licensed warehouse to one of several ports in the United States and Europe.

Coffee Trading Fundamentals

Robusta coffee futures are traded in London on Euronext.liffe.

The size of this coffee futures contract is 10 metric tons.
Coffee futures prices are quoted in U.S. dollars per metric ton with the minimum price movement $1 per ton or $10 for the contract.
Contract delivery months are January, March, May, July, September and November with 10 delivery months available for trading.

Other international exchanges that trade coffee futures include the Singapore Commodity Exchange (Robusta), the Commodities & Futures Exchange (BM&F) in Brazil (Arabica) and the Tokyo Grain Exchange (Arabica and Robusta).

See how VantagePoint Software can predict the Coffee Trading market with nearly 80% accuracy - Get Free Coffee Market Trading Predictions now.

Coffee Trading Tips

Veteran traders will give you a couple of tips about trading related to weather:

Never be short orange juice going into January.
Never be short coffee going into July.

The reasoning is the same: the threat of winter freezes. In the case of coffee futures, a freeze or threat of a freeze in Brazil that could be severe enough to damage coffee trees and reduce coffee production, perhaps for several years, can have a substantial impact on prices because of the dominant role Brazil has in the world coffee market. Depending on the world coffee supply situation, some traders are reluctant to be short coffee after May, looking ahead to the Southern Hemisphere�s winter season. However, this seasonal tendency is not real strong because other countries such as Mexico can fill in with coffee supplies.

Coffee Trading Information

Coffee futures traders should be aware that because coffee production occurs in relatively few countries, it is possible that coffee shipments might be controlled in an effort to boost coffee prices, such as has occurred in the past and similar to what has happened in crude oil and some other markets. Coffee futures prices have been relatively quiet for a number of years but are not immune to blowoff price explosions, as older price charts will reveal.

Coffee Trading Supply

A coffee tree can provide enough coffee beans to fill a one-pound can of ground coffee during each growing season. Coffee beans are the seeds of cherry-sized berries, the fruit of the coffee tree. It takes 3 to 5 years after planting a coffee tree before it can produce marketable coffee beans.

The bulk of world coffee production comes from the tropical highlands of the Western Hemisphere and in the low, hot areas of Africa and Asia. South and Central America produce the majority of coffee traded in world commerce. The world's major coffee producers are Brazil, Vietnam, Colombia and Indonesia. Brazil and Colombia produce mostly Arabica coffee and together account for more than 40 percent of world coffee production. Vietnam produces Robusta coffee, generally considered to be a lower quality type of coffee than Arabica.

The world produces about 120 to 140 million 60-kilogram bags of coffee per year (one 60-kilo bag equals 132.276 pounds). Coffee production can vary significantly from year to year, depending whether Arabica coffee trees are in the on-year or the off-year of their biennial production cycle. Simply comparing this year�s output to last year�s may be misleading for the U.S. coffee futures trader.

Coffee Trading Demand

The United States is the world�s largest importer of coffee. Kraft, Nestl�, Procter & Gamble and Sara Lee are the major roaster companies and account for purchases of about 50 percent of all the annual production of coffee. Demand for coffee is price inelastic: When coffee prices rise, people do not reduce their coffee consumption proportionally; when coffee prices fall, consumer demand for coffee does not proportionally increase to any great extent. Seasonally, U.S. coffee consumption tends to rise in the winter, which may lend support to coffee futures prices.

Coffee Trading History

The International Coffee Organization produces statistics on international coffee production and shipments and promotes coffee trading among nations. Based in London, the ICO consists of 55 coffee producing and consuming member countries and makes available a great deal of data and other information to coffee futures traders.

The Foreign Agricultural Service of the U.S. Department of Agriculture also offers a wealth of coffee information and statistics, including production data by country and for the world, import and export data, etc. The various exchanges that trade coffee futures also have lots of information.

Breaking News

Softs

Jim Wyckoff, Senior Analyst, TraderPlanet.com

July sugar closed down 41 points at 15.44 cents yesterday. Prices closed near the session low on profit-taking pressure. The key "outside markets" were mixed for the sugar futures market yesterday, as the U.S. stock indexes were steady-higher, crude oil prices were steady-lower and the U.S. dollar was lower. Sugar has been trading in a sideways range at higher levels for three weeks. Bulls need to push prices above this trading range to gain fresh power. That means pushing and closing prices above the May high of 16.03 cents. Sugar bulls do still have the near-term technical advantage. Prices are still in a seven-week-old uptrend on the daily bar chart. Bulls' next upside price objective is to push and close prices above technical resistance at 16.03 cents. Bears' next downside price objective is to push and close prices below solid technical support at 14.90 cents. First resistance is seen at 15.75 cents and then at yesterday's high of 15.88 cents. First support is seen at yesterday's low of 15.40 cents and then at last week's low of 15.26 cents.

Wyckoff's Market Rating: 7.0

Read More at TraderPlanet.com »

Livestock

Jim Wyckoff, Senior Analyst, TraderPlanet.com

August live cattle closed down $0.20 at $81.62 yesterday. Prices closed nearer the session low yesterday and closed at a fresh two-month low close. The key "outside markets" were bullish for the cattle futures market yesterday, as the U.S. stock indexes were higher, crude oil prices were higher and the U.S. dollar was lower. Yet the cattle futures sold off anyway, which is a bearish clue. Cattle futures bears have the overall near-term technical advantage. Prices are in a six-week-old downtrend on the daily bar chart. Bulls' next upside price objective is to push prices above solid technical resistance at $83.90. The next downside technical objective for the bears is pushing and closing prices below solid technical support at the February low of $80.70. First resistance is seen at $82.00 and then at yesterday's high of $82.20. First support is seen at yesterday's low of $81.42 and then at last week's low of $81.22.

Wyckoff's Market Rating: 2.0

Read More at TraderPlanet.com »

Soy Complex, Grain Futures

Jim Wyckoff, Senior Analyst, TraderPlanet.com

July soybeans on Friday closed firmer and near mid-range. The key "outside markets" were bullish for soybeans Friday, as the U.S. stock indexes were firmer, crude oil prices were higher and the U.S. dollar was sharply lower. Bulls do still have the near-term technical advantage. Prices are in a three-month-old uptrend on the daily bar chart. The next upside price objective for the bean bulls is to push and close prices above solid technical resistance at $12.50 a bushel. The next downside price objective for the bears is pushing and closing prices below solid support at $11.00 a bushel. First resistance for July soybeans is seen at Friday's high of $11.93 and then at last week's high of $12.00 3/4. First support is seen at Friday's low of $11.75 1/4 and then at $11.64.

[...]

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Metals

Jim Wyckoff, Senior Analyst, TraderPlanet.com

August gold futures closed up $7.60 at $962.80 yesterday. Prices closed nearer the session high yesterday, hit a fresh nine-week high and scored a bullish "outside day" up on the daily bar chart yesterday. Gold bulls have the near-term technical advantage and gained fresh upside momentum yesterday. Prices are in a six-week-old uptrend on the daily bar chart. Bears' next downside price objective is closing prices below solid technical support at $920.00. Gold bulls' next upside price objective is to push and close prices above solid technical resistance at the March high of $970.00. First resistance is seen at yesterday's high of $966.70 and then at $970.00. Support is seen at $955.00 and then at $950.00.

Wyckoff's Market Rating: 7.5.

[...]

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Softs

Jim Wyckoff, Senior Analyst, TraderPlanet.com

July sugar closed down 20 points at 15.74 cents yesterday. Prices closed near mid-range and were pressured by profit taking. Also, the key "outside markets" were mostly bearish for the sugar market yesterday, as the U.S. stock indexes were weaker and the U.S. dollar was stronger. Sugar bulls still have the near-term technical advantage. There are still no early technical clues that a market top is close at hand. Prices are still in a seven-week-old uptrend on the daily bar chart. Bulls' next upside price objective is to push and close prices above technical resistance at 17.00 cents. Bears' next downside price objective is to push and close prices below solid technical support at 14.90 cents. First resistance is seen at yesterday's high of 15.93 cents and then at the contract high of 16.05 cents. First support is seen at yesterday's low of 15.51 cents and then at 15.25 cents.

Wyckoff's Market Rating: 7.5

[...]

Read More at TraderPlanet.com »

Livestock

Jim Wyckoff, Senior Analyst, TraderPlanet.com

August live cattle closed up $0.05 at $83.82 yesterday. Prices closed near the session high again yesterday on more tepid short covering in a bear market. Prices last Friday did produce a bullish weekly high close. The key "outside markets" were mostly bullish for the cattle market yesterday, as the U.S. stock indexes were sharply higher and crude oil prices turned higher as the session wore on. Cattle bears still have the overall near-term technical advantage. Bulls' next upside price objective is to push prices above solid technical resistance at the May high of $84.40. The next downside technical objective for the bears is pushing and closing prices below solid technical support at the May low of $81.60. First resistance is seen at last week's high of $83.90 and then at $84.00. First support is seen at yesterday's low of $83.25 and then at $83.00.

Wyckoff's Market Rating: 3.5

July Soybeans

Jim Wyckoff, Senior Analyst, TraderPlanet.com

July soybeans on Friday closed weaker and near the session low on profit-taking pressure. Bulls still have the solid near-term technical advantage. Prices are still in an 11-week-old uptrend on the daily bar chart. The next upside price objective for the bean bulls is to push and close prices above psychological resistance at $12.00 a bushel. The next downside price objective for the bears is pushing and closing prices below solid support at the April high of $10.64 1/2 a bushel. First resistance for July soybeans is seen at $11.77 1/2 and then at last week's high of $11.89 1/2. First support is seen at Friday's low of $11.64 and then at $11.50.

$16.50 -------- the contract high
$11.45 3/4 --- 10-day moving average
$11.07 1/4 --- 20-day moving average
$10.53 1/2 --- 40-day moving average
$6.85 -------- the contract low

JULY SOYBEAN MEAL

July soybean meal on Friday closed weaker and near the session low on profit taking after hitting a fresh 8.5-month high early on. Bulls still have the solid near-term technical advantage. The next upside price objective for the bulls is to produce a close above solid technical resistance at $390.00. The next downside price objective for the bears is pushing and closing prices below solid technical support at $350.00. First resistance comes in at $380.00 and then at [...]

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Energies

Jim Wyckoff, Senior Analyst, TraderPlanet.com

July crude oil closed down $1.03 at $61.00 a barrel yesterday. Prices closed near mid-range yesterday and were pressured on profit taking and a lower U.S. stock market. Bulls still have the near-term technical advantage. A four- week-old uptrend is in place on the daily bar chart. The next downside price objective for the crude oil bears is to produce a close below solid technical support at this week's low of $56.76. The next upside price objective for the bulls is producing a close above solid technical resistance at $65.00 a barrel. First resistance is seen at yesterday's high of $61.87 and then at this week's high of $62.26. First support is seen at $60.00 and then at $59.00.

Wyckoff's Market Rating: 6.5

[...]

Read More at TraderPlanet.com »

Metals

Jim Wyckoff, Senior Analyst, TraderPlanet.com

June gold futures closed up $12.80 at $939.50 yesterday. Prices closed near the session high and hit a fresh two-month high yesterday. Prices were again supported by a weaker U.S. dollar yesterday. Gold bulls have the near-term technical advantage and gained fresh upside momentum yesterday. Prices are in a four-week-old uptrend on the daily bar chart. Bears' next downside price objective is closing prices below solid technical support at this week's low of $915.20. Gold bulls' next upside price objective is to push and close prices above solid technical resistance at the March high of $970.00. First resistance is seen at yesterday's high of $941.00 and then at $945.00. Support is seen at $935.00 and then at $930.00.

Wyckoff's Market Rating: 7.0

[...]

Read More at TraderPlanet.com »

Softs

Jim Wyckoff, Senior Analyst, TraderPlanet.com

July sugar closed up 2 points at 15.63 cents yesterday. Prices closed near mid-range yesterday. Sugar bulls have the near-term technical advantage. There are still no early technical clues that a market top is close at hand. Prices are still in a five-week-old uptrend on the daily bar chart. Bulls' next upside price objective is to push and close prices above technical resistance at 17.00 cents. Bears' next downside price objective is to push and close prices below solid technical support at last week's low of 14.90 cents. First resistance is seen at yesterday's high of 15.91 cents and then at the May high of 16.03 cents. First support is seen at 15.50 cents and then at yesterday's low of 15.37 cents.

Wyckoff's Market Rating: 7.0

[...]

Read More at TraderPlanet.com »