Coffee Futures

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Coffee Futures Market

Coffee futures are part of the softs commodities markets, and are based on coffee production in primary regions. Most production is dominated by countries such as Brazil, Vietnam, Indonesia and Colombia. India, Guatemala, Ethiopia and Mexico are also major producers.

Coffee Market History

Coffee was originally discovered in Ethiopia more than 2,000 years ago. From Africa, coffee found its way to the Middle East and into coffee houses, which gave coffee its exposure to many travelers. The two most commonly grown species of the coffee plant are Coffea Canephora and C. Arabica, which are cultivated in Latin America, Southeast Asia, and Africa. Arabica coffee is by far the most popular variety.

The largest consumers of the commodity are in the Netherlands, Finland, and Sweden, with the U.S. far down the list at No. 15. World coffee exports amounted to 8.85 million bags in December 2014, compared with 8.83 million bags in December 2013, according to the International Coffee Organization.

The price of coffee has been extraordinarily volatile over the years, both in current- and constant-dollar terms. It is subject to supply disruptions such as freezes in the Brazilian highlands, and to new exporters buying market share via lower prices

Coffee Market Facts

  • Brazil is the biggest producer and exporter of coffee in the world, with 33 percent of total production from September 2010 to August 2011
  • The word “coffee” is believed to be come from Kaffe, Ethiopia, where coffee originated in the 9th century.
  • Derived from the coffee bean, it was not well-received, and at one time was even banned in Turkey and Egypt.
  • The demand for coffee gradually increased until it has become one of the most popular beverages in the world.

Coffee Futures Trading

  • Coffee futures have traded in New York since 1882, first on the New York Cocoa Exchange (later part of the Coffee, Cocoa and Sugar Exchange), then on the NYBOT and now on ICE and NYMEX.
  • U.S. Options on coffee futures were introduced in 1986
  • The futures are traded in cents per pound. One contract of coffee controls 37,500 pounds of coffee. When the price of coffee is trading at $1/pound, the cash value of that contract will be $37,500 ($1.00 x 37,500 = $37,500).
  • Coffee futures are one of the larger commodities contracts in dollar terms, and therefore, little movements have a big impact on price. The commodities have one of the larger daily ranges of all the softs, making it a very volatile commodity.

You can learn more about Soft futures by downloading our guide, Free Fundamentals of Trading Soft Futures.

Coffee Futures Contract Specifications

Contract Symbol Contract Unit Price Quotation
IKC 37,500 lbs cents per pound
Trading Exchange Trading Hours Tick Value
ICE 4:15 – 13:30 (NY) $0.05/lb = $18.75

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