|Coffee C Arabica
|0.05 cents per pound ($18.75 per contract)
|37,500 pounds (approximately 250 bags)
|Mar, May, Jul, Sep, Dec (H, K, N, U, Z)
|3:15a.m. - 12:30p.m. (Settles 12:25p.m.) CST
|Value of One Futures Unit
|Value of One Options Unit
|Last Trading Day
|Eight business days prior to last business day of delivery month
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. Coffee is 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 places 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 five years old and then be productive for about 15 years. The average coffee tree produces enough beans to make about 1 to 1 Â½ pound of roasted coffee per year. It takes approximately 4,000 handpicked green coffee beans to make a pound of coffee. Wine was the first drink made from the coffee tree using 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 mainly at high altitudes of 600 to 2,000 meters, with Brazil and Colombia being the largest producers. Arabic coffee is traded at the Intercontinental Exchange (ICE). 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.
Meager prices for coffee can create serious long-term problems for coffee producers. When prices fall below production costs, there is little economic incentive to produce coffee, and coffee trees may be 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 the winter months in Brazil. A major freeze in Brazil occurs roughly every five years on average.
Coffee futures and options are traded at the ICE Futures U.S. exchange, ICE Futures Europe exchange, and the B3 exchange (formerly BM&F/BOVESPA).
Prices - ICE Arabica coffee futures prices (Barchart.com symbol KC) raced higher in early 2022 and posted an 11-year high in February of 260.45 cents per pound. Coffee prices rallied sharply in early 2022 due to excessive dryness in Brazil, supply chain turmoil from the pandemic, and a limited amount of container ships that sent freight costs soaring. Concern about future coffee supplies prompted coffee roasters worldwide to tap ICE coffee inventories, which sent ICE stockpiles plummeting to a 22-year low in February. Coffee prices then drifted lower into early July on concern about global demand. The war in Ukraine upended Brazil's coffee exports after Cecafe reported Brazil's coffee exports to Russia and Ukraine were down 72% and 62%, respectively, in March from February. Also, the resurgence of Covid infections in China kept pandemic lockdowns in place that curbed the country's coffee consumption. Coffee prices then rebounded into late August as a La Nina weather pattern led to drier-than-normal conditions in Brazil and Colombia, the two largest arabica coffee producers. Brazil's 2021/22 arabica coffee production fell -26.7% yr/yr to 36.4 million bags, the lowest in 4 years, and Colombia's 2021/22 arabica production fell -12% yr/yr to 11.1 million bags. Coffee prices then tumbled to a 1-1/2 year low of 150.45 cents per pound in November as supply chain turmoil eased and freight costs dropped. Also, the Brazilian real tumbled to a 1-year low in November, which encouraged export selling by Brazil's coffee producers. In addition, weather conditions improved in Brazil, which prompted Conab to project that Brazil's 2023 arabica crop would rise +14.4% to 37.4 million bags. Coffee prices finished 2022 down -76% yr/yr at 167.30 cents per pound.
Supply - World coffee production in the 2022/23 marketing year (July-June) is expected to rise by +4.7% yr/yr to 174.950 million bags (1 bag equals 60 kilograms or 132.3 pounds). Coffee ending stocks in the 2022/23 marketing year are expected to rise by +6.3% yr/yr to 34.704 million bags. Brazil is the world's largest coffee producer by far with 36.8% of the world's supply followed by Vietnam with 17.7%.
Demand - World consumption of green coffee in 2020/21 remain unchanged yr/yr at 161.872 million bags.
Trade - World coffee exports in 2022/23 are forecasted to rise by +0.8% yr/yr to 141.564 million bags, down from the 2020/21 record high of 144.389 million bags. The world's largest exporters of coffee in 2021/22 were Brazil with 23.6% of world exports, Vietnam with 20.6%, and Columbia with 10.0%. U.S. coffee imports in 2021 fell by -4.0% yr/yr to 26.288 million bags, modestly below the 2019 record high of 29.216 million bags. The key countries from which the U.S. imported coffee in 2022 were Brazil with 28.2%, Columbia with 17.8%, Mexico with 6.2%, and Guatemala with 5.5%.
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