How to Make a Profit on Coffee?

Posted by OliverPearson 0

Coffee

Being the most popular and recognizable drink around the globe, coffee is also a perfect underlying asset to trade binary options. Coffee beans are traded by means of future contracts on a commodity exchange. One coffee futures contract is 37500 pounds. The price is quoted per pound.

Coffee is traded on the InterContinental Exchange (ICE) under the ticker symbol KC1.

Also, coffee futures contracts are traded on the NYMEX under the ticker symbol KT and on the Tokyo Grain Exchange.  All brokers have the most liquid and important ICE coffee futures available.

trading CoffeeThe ICE Arabica coffee futures is a price of coffee delivered from one of the 19 countries to the U.S. or  European ports.

The coffee future months are March, May, September, and December. Trading is conducted Monday through Friday 11:00 a.m. to 5:00 p.m. (GMT). The world’s top coffee producing countries are Brazil (35% of the total world production), Mexico, Columbia, Guatemala, Salvador, Ethiopia, India etc.

The largest coffee consumers are developed countries like the United States, Germany, and Italy being the major coffee importing countries.

 Coffee Price Forecast

The factors affecting the coffee prices are multiple.  Arabica coffee beans are mainly grown in South and Central America. They have the best quality and hence the highest price. Due to this factor, Brasilia is the world’s leading exporting country. The Brazilian coffee has a strong competitor, the Robusta coffee that is quoted lower.  This factor enabled Vietnam to develop its coffee industry and become the world’s second exporting country.

trading Coffee assetOver 50 per cent of all Robusta purchases accounts for four leading corporations, namely, Kraft, Procter&Gamble, Nestle, and Sara Lee. These largest coffee producers deal with Robusta due to its low price as compared to Arabica  the price of which is 70 per cent higher. This is the main reason why mass production uses coffee beans having worse properties.

The following factors give a short-term support to the coffee market:

  • High demand for Robusta (it’s cheaper than Arabica) and low stock on the London Commodity Exchange.
  • Producers’ attempts to increase prices of coffee while supplying low volumes.

 

Some producers try to supply low volumes to the market to increase the price of coffee. Generally, this strategy results in increase in stock which anyway will be supplied to the market. Therefore, this factor gives a short-term support to the market. Demand for coffee is at the peak in winter, and then it gradually falls providing  a short-term support to the market as well.

Medical research and publications play a significant role in coffee prices. For example, many studies have shown that moderate coffee consumption may reduce the risk of Alzheimer’s disease, liver cancer, arthritis etc. All thesefactors outperform significantly the risks that may be associated with coffee consumption. If many scientists are going to find all possible health benefits of coffee, this is a good sign for both coffee fans and investors.

Coffee optionsCoffee plays a key role in some developing economies due to good demand for this drink around the globe. For instance, coffee accounts for 60 per cent of Ethiopia’s exports.

 

Weather Impact on Coffee Prices

Harvests depend on weather. This is one of the important points in analysis as the price of coffee beans is mainly affected by a crop. The negative factor is natural disasters, military operations, calamities etc.

For instance, the price of the Arabica futures has increased by 60 per cent since January 2014. The quotes spiked on drought in Brazil that might reduce a future crop by 20 per cent.

People drink millions of cups of coffee every day. Known since the 9th century, this drink enjoys immense popularity due to which it has a status of one of the key commodities traded today.

How to Make a Profit on Coffee

To make a profit on coffee, you may come to a commodity exchange and get through a great number of formalities. Besides, you need to have a certain amount of money. However, I advise you to trade binary options on coffee.

You just need to figure out the price direction during a certain period of time. For instance, you expect the price to increase during next 15 minutes. If your forecast is accurate, you make a 70% profit.  

To make a profit on coffee, I deal with 24option, one of the most popular brokers.

I browse the broker’s website and select COFFEE as an underlying asset. I click the HIGH button as I expect the price to rise. I set the time of expiration to 12:30 p.m. which means that I invest for 30 minutes because it’s 12:00. now. I select the amount of my investment as $130 and click the BUY button:

1

If the coffee price moves up even by 0.001 within these 17 minutes, I make a 70% profit.

Top coffee exporters are still gripped by droughts, hence the trend is bullish. After a little while, I check the result of my trade:

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Enjoying taste and aroma of coffee, you can make a descent profit on it at the same time. By the way, to enhance your trading results, you can you use financial strategies.You can buy binary options on coffee from 24option having a wide choice of different underlying assets including shares of the world’s top companies. 

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