Everything you need to Know about Coffee Trading
Coffee, as one of the most stable commodities on today’s markets, has a lot of untapped potential. It is our belief that in order to maintain balanced and relatively safe portfolio, a trader must put some efforts in diversifying the commodities and currencies included in it. This is very useful for securing your investments.
Before choosing to trade with coffee, here’s some interesting facts regarding the market environment. The main coffee suppliers are from South America and the southern part of Asia and include countries such as Brazil, Colombia, Indonesia and Vietnam. To make things even more competitive, Brazil is the leading supplier, but it is Vietnam that offers a better price.
•The Arabica variety exported from South America holds a higher price range due to the fact that it is considered higher quality. However, the producers of the lower-quality Robusta variety are competitive due to the lower price of their commodity, thus creating specific market dynamics.
•The “fair trade” initiative also plays a significant role in coffee pricing. Since producers have a pre-set price guaranteed to them, there’s worldwide trend of private negotiation with co-ops before the conclusion of a deal.
•For years now, coffee has been subject to a number of medical research. It is considered to have positive effect on diseases like Alzheimer’s, gout, liver disease, etc. This could have significant effect on the commodity pricing in the event of significant research developments.
•In many countries, coffee is the mainsource of livelihood for the poorest and its pricing has significant impact on producers. That, combined with the unpredictable nature conditions and the seasonality of trade, results in a rather cycling pricing of the commodity.
In a nutshell, coffee market is characterized by stability and high demand. The constant competition between the quality Arabica and the not so expensive Robusta sets the premise of interesting market dynamic for coffee trading. In addition, the requirement for fair trade is an opportunity for establishing a specific premium market segment. As a whole, this makes predictions a bit complicated, but at the same time when opportunities are seized, the result may be more than profitable. In addition, there is a rising trend of people willing to pay more for quality and sustainably produced commodities which is a sharp turn from the economic indicators with biggest influence until recently. Having said all that, coffee remains a highly profitable commodity for both beginner and expert traders.
With everything said above, it is clear that although a bit unusual, when traders use the right strategy, coffee can offer interesting profit opportunities for traders. It is also a great way to maintain a balanced portfolio – a must for every trader.