Trading Coffee as a commodity

Coffee commodity tradingUnbeknownst to some traders, coffee is one of the world’s largest traded commodities, even ahead of precious metals like gold or silver (which nevertheless, remain the most valuable traded commodities).

An overview of the coffee trading market

It is estimated that the coffee market generates revenues well in excess of the $80 million mark per year, with the biggest consumers being European countries and the United States. It is now possible to trade coffee electronically at the major stock markets.

Commodity traders looking to get started in the coffee trading market need to be aware of the two types of coffee that exist: Robusta (also called “conillon”) and Arabica (which is more expensive to produce). Robusta coffee is traded in London, Singapore, and Tokyo, while Arabica is traded in New York and Brazil.

Traders must also note that coffee has a biennial crop cycle, so year-on-year price comparisons can be misleading.

Coffee as a commodity: future predictions

Between 2000 and 2004, a number of new countries (mainly in Africa and South East Asia) entered the coffee market. This caused a dramatic fall in the prices of coffee at global level. However, demand seems to remain largely untouched by these fluctuations. In fact, the experts predict that demand will continue to grow as production drops slightly due to the crop cycle of Arabica beans production.

It is also expected that there will be changes in the demand according to coffee type. Demand for Robusta beans (mostly produced in Vietnam) grew by 9 per cent in an 18 year period, while demand for Arabica beans (mostly grown in Africa and Brazil) decreased by the same percentage during the same period.

Coffee consumption worldwide continues to grow at a steady annual rate of 2 per cent, so it is not surprising to see why coffee is (and will continue to be) an appealing commodity for many traders.

Read more about some of the other common commodities.