There are two main types of coffee: Robusta and Arabica. The coffee traded on the ICE Futures contract in the U.S. is Arabica. The Robusta coffee beans are considered to have more bitterness and it also contains more caffeine. Market participants find coffee one of the most interesting commodities to trade in the financial market. Coffee is a member of the soft complex and most of these commodities are prone to wild swings in price and usually most volatile financial instrument available ever.
For trading we concentrate on Arabica beans however the fundamentals of Robusta can affect the prices of 'Arabica' prices because Robusta is a very close substitute. Arabica beans are predominately grown in Brazil, while Columbia is the second largest producer. They are also grown in Central America, but most coffee traders focus on Brazil when they are trading coffee.
US Coffee Market
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 “KC” 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.
International Coffee Market
London coffee futures are traded on the 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).
Technically speaking with the chart,
Defending your coffee position right now is preferred strategy. While price is trading at $89.97.Moving averages (15: $118.55, 20: $118.80, 50: $120.89). Possible pullback from current resistance of $118.80.Bearish crossover is on the line and ready for golden cross after a surge till $120.89 (if failed to penetrate).Short speculative position can be execute after breaking and closing below $116.50 on a intraday basis.
*Overall trend seems to be bearish for the week, and avoid shorting coffee in July.