Cash Coffee Market (KC-099)
Coffee ranks as one of the world’s major commodity crops. Coffee is widely cultivated in plantations in tropical countries for export to temperate countries. The world’s largest coffee producing region is Latin America, and the Caribbean.
Cash differentials paid for arabica coffee in Central America and other Latin American Arabica origins strengthened this week even as New York futures prices hold on to most gains accumulated during the last two weeks of trading.
Premiums for top grade SHB coffee from Guatemala, one of the countries most severely hit by the worst outbreak in history of the leaf rust crop pest, were quoted at between 26 cents per pound and 27 c/lb while a “couple of containers with hard beans that found its way to the market” from Guatemala were quoted at premiums between 17 and 18 c/lb, traders said.
Nicaraguan SHG are on par with those of El Salvador. Honduras and Mexico, long the region’s cheapest source of top-quality coffee, were attracting offers at between 8 and up to as high as 12 cents premiums for Honduran SHG and Mexican HG EPs.
When you trade coffee futures, your futures price depends on where you get into the market. After you post your initial margin, your profit or loss depends on where you enter and exit the market (minus transaction costs).
The U.S. coffee futures market was established in 1882 as merchants and traders created the Coffee Exchange of New York to bring order to pricing in the industry. When a commodity such as coffee assumes a growing position in the global economy, it also invites vulnerability to major price shocks and increased hedging and trading activity.