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    Coffee 1st Front Month  (KC*1)

    167.80s+0.90 (+0.54%) 12:59P EST (ICEUS) View Help
    Commodity Price Quote as of Friday, May 25th, 2012

    Contract Specifications

    Symbol KC
    Name Coffee (KC)
    Exchange ICEUS
    Trading Months March, May, July, September, December (H, K, N, U, Z)
    Trading Unit 37,500 lbs (approximately 250 bags)
    Tick Size 0.05 cents per lb. ($18.75 per contract)
    Daily Limit None
    Trading Hours 2:30a.m. - 1:00p.m. CST
    Last Trading Day Eight business days prior to last business day of delivery month
    Value of one futures unit $375
    Value of one options unit $375

    CRB Yearbook Description

    Coffee is one of the world's most important cash commodities. Coffee is the common name for any type of tree in the genus madder family. It is actually a tropical evergreen shrub that has the potential to grow 100 feet tall. The coffee tree grows in tropical regions between the Tropics of Cancer and Capricorn in areas with abundant rainfall, year-round warm temperatures averaging about 70 degrees Fahrenheit, and no frost. In the U.S., the only areas that produce any significant amount of coffee are Puerto Rico and Hawaii. The coffee plant will produce its first full crop of beans at about 5 years old and then be productive for about 15 years. The average coffee tree produces enough beans to make about 1 to 1 ˝ pounds of roasted coffee per year. It takes approximately 4,000 handpicked green coffee beans to make a pound of coffee. Wine was actually the first drink made from the coffee tree using the coffee cherries, honey, and water. In the 17th century, the first coffee house, also known as a "penny university" because of the price per cup, opened in London. The London Stock Exchange grew from one of these first coffee houses.

    Coffee is generally classified into two types of beans: arabica and robusta. The most widely produced coffee is arabica, which makes up about 70 percent of total production. It grows mostly at high altitudes of 600 to 2,000 meters, with Brazil and Colombia being the largest producers. Arabic coffee is traded on the ICE Futures U.S. (ICE) exchange. The stronger of the two types is robusta. It is grown at lower altitudes with the largest producers being Indonesia, West Africa, Brazil, and Vietnam. Robusta coffee is traded on the LIFFE exchange.

    Ninety percent of the world coffee trade is in green (unroasted) coffee beans. Seasonal factors have a significant influence on the price of coffee. There is no extreme peak in world production at any one time of the year, although coffee consumption declines by 12 percent or more below the year's average in the warm summer months. Therefore, coffee imports and roasts both tend to decline in spring and summer and pick up again in fall and winter.

    The very low prices for coffee in 2000-03 created serious problems for coffee producers. When prices fall below the costs of production, there is little or no economic incentive to produce coffee. The result is that coffee trees are neglected or completely abandoned. When prices are low, producers cannot afford to hire the labor needed to maintain the trees and pick the crop at harvest. The result is that trees yield less due to reduced use of fertilizer and fewer employed coffee workers. One effect is a decline in the quality of the coffee that is produced. Higher quality Arabica coffee is often produced at higher altitudes, which entails higher costs. It is this coffee that is often abandoned. Although the pressure on producers can be severe, the market eventually comes back into balance as supply declines in response to low prices.

    Coffee prices are subject to upward spikes in June, July and August due to possible freeze scares in Brazil during the winter months in the Southern Hemisphere. The Brazilian coffee crop is harvested starting in May and extending for several weeks into what are the winter months in Brazil. A major freeze in Brazil occurs roughly every five years on average.

    Coffee futures are traded on the Bolsa de Mercadorias & Futuros (BM&F), the Tokyo Grain Exchange (TGE), the London International Financial Futures and Options Exchange (LIFFE), and the ICE Futures U.S. (ICE) exchange. Options are traded on the BM&F, the LIFFE and the ICE.

    Prices - ICE Arabica coffee futures prices showed weakness during 2008 due to the financial crisis and the global recession, falling by 39% from the 11-year high of 166.75 cents per pound posted in February 2008. However, coffee prices bottomed out at a 2-1/2 year low of 101.60 cents per pound in December 2008 and then rallied through most of 2009. Coffee prices posted a new 1-1/2 year high in December 2009 and closed the year up 21% at 135.95 cents. Bullish factors in 2009 included (1) the global economic recovery, which boosted coffee demand, (2) the 14% y/y decline in Brazil's 2008-09 harvest, (3) the USDA's forecast for a 3.7% decline in 2009-10 world coffee production to 125.2 million bags, and (4) a sharp 15% decline in 2009-10 world ending stocks to 34.7 million bags, which would produce a record low in the stocks/supply ratio of 13.7% (data back to 1960). The tight supply situation was also illustrated by the fact that coffee supplies in exchange warehouses were at the lowest levels in a decade in late 2009. In addition, Brazil is expected to have near-zero inventories by spring 2010, meaning Brazil will have no buffer stocks to sell even at higher prices.

    Supply - World coffee production in the 2009-10 marketing year (July-June) fell -3.7% yr/yr to 125.214 million bags (1 bag equals 60 kilograms or 132.3 pounds), down from last year's record high of 130.030 million bags. The decrease in production caused the 2009-10 ending stocks to fall -15.3% to 34,690 million bags.

    Brazil is the world's largest coffee producer by far with 43.5 million bags of production in 2009-10, which was 35% of total world production. Other key producers include Vietnam with 14% of the world's production and with Columbia and Indonesia each with 7%. Brazil's coffee production in 2009-10 fell -15.5% y/y to 43.5 million bags. Vietnam has become a major coffee producer in recent years, boosting its production to 17.500 million bags in 2009-10, up from less than a million bags in 1990.

    Demand - U.S. coffee consumption in 2009 fell -2.9% to 22.550 million bags, but still not far below the record high of 25.377 million bags seen in 1968.

    Trade - World coffee exports in 2009-10 fell -10.9% yr/yr to 91.474 million bags, down from last year's record high of 102.710 million bags. The world's largest exporters of coffee in 2009-10 were Brazil with 27% of world exports, Vietnam with 18%, and Columbia with 9%. U.S. coffee imports in 2008 (latest data) was virtually unchanged from the previous year at 23.217 million bags. The all-time high of 24.549 million bags was posted in 1962. The key countries from which the U.S. imported coffee in 2008 were Brazil (which accounted for 21% of U.S. imports), Columbia (18%), Guatemala (8%), and Mexico (6%).

    Articles from the Commodity Research Bureau (CRB) Commodity Yearbook. The single most comprehensive source of commodity and futures market information available, the Yearbook is the book of record of the Commodity Research Bureau, which is, in turn, the organization of record for the commodity industry itself. Its sources - reports from governments, private industries, and trade and industrial associations - are authoritative, and its historical scope is second to none. Additional information can be found at www.crbyearbook.com.
    More commodity data from Commodity Research Bureau.