Coffee: Traded Commodity

If you can't imagine your life without coffee, you may probably want to put it first place in the ranking of top commodities. However, this bittersweet flavored commodity ranks second among the best commodities to trade.

According to some estimates, people drink around 2.25 billion cups of coffee on a daily basis. The total global production of coffee by exporting countries is more than 150 million jute bags annually. The top 5 coffee producing countries are:

  • Brazil (2,595,000 metric tons per year)

  • Vietnam (1,650,000 m.t.)

  • Colombia (810,000 m.t.)

  • Indonesia (660,000 m.t.)

  • Ethiopia (384,000 m.t.)

Coffee prices are significantly driven by several factors, including:

  • Geopolitics. Political instability in coffee-producing countries

  • Climate. Coffee is highly sensitive to weather conditions and require a special combination of sunshine and rainfall.

  • Oil prices and transportation. As coffee growers have to transport coffee to different parts of the world, transportation costs really matter. Therefore, the price for oil, i.e. for fuel, can have a significant influence on coffee price.

  • Health awareness. The positive or negative sentiment about the health effects of drinking coffee.

  • The US dollar rate. A strong dollar can depress coffee prices, while a weak USD is good for its price.

Historically, coffee reached its all-time high of $339.86 in April 1977. Coffee’s record low of 42.50 cents per pound occurred in October 2001 at the height of the “Coffee Crisis”. The latest price for coffee as of 24 September 2019 was $98.900 (per pound).

According to the most recent data, coffee continues to get cheaper, as the price of coffee has been trending downward. Major coffee-growing countries, like Brazil, have produced an oversupply, creating a glut in the market. Political instabilities in Guatemala and Venezuela worsened the already difficult situation, as growers in remote locations struggled to get the necessary equipment.However, the prices could still potentially jump up due to weather related complications and moves in the futures market.