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Bold, stimulating, robust. No, we're not describing your favourite coffee – we're giving you an idea of what it feels like when you trade it.
With more than 2.25 billion cups of coffee consumed in the world every day, it's widely believed coffee is the second most-traded commodity after oil.
Whether or not that's entirely true is subject to a bit of debate, but 3 out of 4 Australians have to have at least one cup of coffee today, and of those, 28% have three or more cups.
Not too many other commodities can boast that kind of popularity, and it means that coffee price is the subject of major market speculation.
The two main types of coffee are Arabica and Robusta.
Arabica is considered the premium, more flavourful option of the two and is therefore more expensive, with beans selling for between US$2.60/kg and US$3/kg in recent times.
It makes up about 60 per cent to 70 per cent of all coffee production and mainly comes from Brazil and Colombia.
Robusta, on the other hand, can thrive in lower altitudes and hotter climates (as the name suggests), and has a more earthy and bitter taste than Arabica, as well as a higher caffeine content.
Robusta beans, which are mostly grown in Vietnam, have traded for between US$1.50 and US$2 in recent times and make up about 30% of the coffee bean market.
When it comes to actually consuming the beans, the United States makes up 18.5 per cent of total coffee imports, followed by Germany (11.2 per cent) and France (9.1 per cent).
“Global production of coffee is measured in jute bags, which hold 60kg of coffee.”
Trading in coffee comes with a degree of volatility, with key factors that influence supply and demand being:
All of these factors combine to make a highly volatile commodity. Coffee reached an all-time high of 339.86 US cents in April 1977 due to one of the most damaging frosts ever to hit in Brazil.
Two years before, the price was just 45 US cents. Six months after the peak prices had halved to 149 US cents.
More recently in 2011 prices increased partly due to the biennial cycle of lower and higher output for Brazil's Arabica coffee plants, before dropping off again throughout 2012 due to a bumper crop season. It's another factor to consider if you're trading over longer periods.
There are a number of ways you can trade coffee using the CMC Markets CFD Trading platform:
It’s also worth bearing in mind that timezone differences mean world coffee market hours on the Intercontinental Exchange can be difficult to monitor without caffeine: the Robusta market runs from 6pm to 2.30am AEST, and the Arabica market from 6.15pm to 3.30am.
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Investing in CMC Markets derivative products carries significant risks and is not suitable for all investors. You could lose more than your deposits. You do not own, or have any interest in, the underlying assets. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. Spreads may widen dependent on liquidity and market volatility. The information on this website is prepared without considering your objectives, financial situation or needs. Consequently, you should consider the information in light of your objectives, financial situation and needs. CMC Markets Asia Pacific Pty Ltd ABN 11 100 058 213, AFSL No. 238054 (the derivative product issuer), CMC Markets Stockbroking Limited, Participant of the ASX Group (Australian Securities Exchange) and SSX (Sydney Stock Exchange) and Chi-X (Chi-X Australia), ABN 69 081 002 851, AFSL No. 246381 (the stockbroking services provider) provides the financial products and/or services. It's important for you to consider the relevant Product Disclosure Statement ('PDS') and any other relevant CMC Markets Documents before you decide whether or not to acquire any of the financial products. Our Financial Services Guide contains details of our fees and charges. All of these documents are available at cmcmarkets.com.au or you can call us on 1300 303 888.
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