What influences coffee prices
High quality Arabica coffee beans are generally grown in South and Central America and command a high price for their cultivation. This has catapulted Brazil (who produces over 2.7 million metric tons annually) to become the largest coffee exporting country globally. Leaving Brazil wide-open to competition of cheaper coffee beans such as Robusta. Robusta has developed strong demands worldwide and Vietnam is a leading competitor in production of coffee, producing over 1.65 million metric tons on an annual basis. Vietnam comes in second in the world of coffee exports as Robusta beans are 70% cheaper than Arabica beans making it more available to the masses.
Weather and climate have everything to to with production of the coffee berries. The production and roasting process attribute to it’s distinctive taste. If weather is not at it’s optimal, this affects the cultivation and production of the plant, hence, affecting the price of coffee. Should the roasting process be shorter the beans tend to be more acidic and bitter, yet cheaper, while longer roasting result in a smoother taste, and this process can also influence the price.
The demand for coffee is high in the countries that consume the most coffee, which are: Finland leading with the largest amount of coffee consumed per person on average at 9.6 kg per capita, Norway with 7.2 kg per capita and the Neatherlands at 6.7 kg per capita.
Understanding coffee trading
every commodity has it’s own ticker symbol, contract value and margin requirements, and to trade this commodity you should be aware of all it’s components to eventually calculate your potential profits and losses.
Let’s say the trader opened a position equivalent to 37,500 pounds, which is the standard contract size on ICE. Should there be a price move from 135.5 cents to 140.7 cents per pound, to calculate the monetary value of this contract subtract the entry price from the exit price, multiply by the size of the position, and divide by 100 to get the value in USD: (140.7-135.5)x37500/100=$1950