Everything you need to Know about Coffee Trading
Coffee trading remains steady in almost any market condition, although its massive potential is yet to be discovered by many. We believe that a trader needs to combine a wide variety of currencies and commodities in order to maintain a well-balanced portfolio, i.e. not to put all his/her eggs in ne basket.
The coffee market is dominated by supply coming mainly from Brazil, but also from Vietnam, Indonesia and Colombia. In fact, Brazil produces twice as much as its nearest competitor – Vietnam, but the cheaper cost of the Vietnamese beans creates an interesting competition within this market.
- The South American Arabica beans are commanding a higher price as they
are generally considered of higher quality. This leaves the Arabica exporting
countries open to competition from companies producing the cheaper Robusta bean
creating an interesting coffee trading climate.
- The rise of the ‘fair trade’ bean has also influenced heavily the coffee
commodity trading. Growers are offered a guaranteed set price before harvest
which creates an environment with more privately negotiated deals with co-ops
- Coffee is also being studied for its medical benefits in fields such as
Alzheimer’s, liver cirrhosis, gout and more. And in the event of a breakthrough
it could mean an interesting spanner in the coffee commodity trading market.
- Coffee is the key cash crop in many countries, including some of poorest
countries in the world that depend on coffee for their income. This does lead
to cyclic pricing, due to the whims of nature and the impact on the farmers.
Coffee trade is also highly seasonal.
What are the advantages of coffee trading?
Coffee is a high demand steady market. The rise of the Robusta growing countries have also created an interesting market where the lure of quality vs cost is creating waves. Also, a premium niche market is being created by the increased demand for ethically sourced coffee. All of this makes coffee a commodity that is difficult to predict but also quite lucrative. Where demand is beginning to outstrip easy supply and ‘green’ consumerism is on the rise, counter to previous economic indicators, people are willing to pay premium costs for goods. In conclusion, traders can increase their profits with the right strategies while coffee trading is in an interesting state of flux.
Apparently, coffee training being an unusual but interesting commodity holds great opportunities for both beginners and experienced traders. It's important to remember that the smart option for any trader is a diverse portfolio.