Coffee futures price, forecast and trading example

Coffee has always been a luxury product. Along with tobacco, it was brought to Europe as one of the most valuable resources during the time of the conquistadors. After so many years, coffee is considered one of the most sought-after products in the world.

Coffee stocks

Almost all companies operating in this sector do not concentrate only on growing, processing grains, and producing drinks based on them. Typically, coffee is only part of their business.

Among the largest companies whose business is at least partially related to the cultivation/processing of coffee beans are:

• Nestle SA The largest food manufacturer in the world, the capitalization of the Swiss company exceeds $300 billion. It produces a wide range of drinks and food products - from baby food to bottled water. Coffee drinks are just one of the segments in which Nestlé operates.
• Keurig Dr Pepper Inc. American manufacturer of beverages and equipment for the food industry. Coffee in its portfolio occupies one of 4 key areas; coffee machines and drinks are produced.
• Restaurant Brands International Inc. The company produces various drinks, including coffee. Its market is all of North America, capitalization is about $30 billion. The brand is relatively new, it emerged in 2014 as a result of the merger of Burger King and Tim Hortons.
• American coffee giant, capitalization exceeds $100 billion, and Starbucks outlets are located in many countries around the world. The company is engaged in roasting beans, selling them and selling coffee; its portfolio includes a network of 35,000+ stores.
• M. Smucker. American food manufacturer and marketer. The range is quite wide - from coffee and peanut butter to cat food. Capitalization exceeds $10 billion, Smucker focuses mainly on the domestic market.
• Dutch Bros. Another American company, some call it the next Starbucks. It also sells coffee drinks. As of the early 1920s, the Dutch Bros chain had fewer than 1,000 beverage outlets, but management talks about growth potential to 4,000-5,000 stores.
• Black Rifle Coffee Company. The young company, which went public through a SPAC in 2022, offers premium coffee beans. Works to order, so far the focus is on the premium segment.
• Coffee Holding Co. He roasts beans and also sells green beans. There is a segment aimed at wholesale buyers; finished products are also produced under our own brand.
• Farmer Brothers Company. It specializes in the production and supply of tea, coffee and other products, with a total portfolio of about 300 items.
• Yum China Holdings, Inc. He is engaged in the restaurant business, managing restaurants under world-famous brands (Taco Bell, KFC, Pizza Hut and others). Restaurant menus also include various types of coffee, so its shares can be listed in coffee stocks.
• Monster Beverage Corporation. The company is known primarily for its Monster Energy energy drinks. Its products include coffee.
• Luckin Coffee Inc. The company is called the Chinese equivalent of Starbucks; its product range includes various options for coffee drinks. The approach to organizing a business is similar to Starbucks, hence the comparison.

 

Factors influencing coffee prices

In the second half of the 20th century, coffee production doubled worldwide. For many years, Brazil has been in first place in the world in terms of production volumes. In this state, the territory involved in the production of this grain occupies approximately 4/5 of the EU area.

Variety "Arabica"

How to Trade Commodities? The largest volumes of Arabica (Coffee C) are traded on the NYMEX Commodity Section. Ticker on the New York market is KS. In second place are the exchanges of Singapore and London.

• A delivery futures contract is a contract for the delivery of 37.5 thousand pounds of grains to the recipient port.
• The minimum price change is $0.005 (which translates to $18.75 per contract).
• Arabica deals are conducted from Monday to Friday: in New York - from 3:30 to 14:00, in Singapore - from 15:30 to 2:00, in London - from 8:30 to 19:00 (local time).

Coffee price dynamics

It is worth saying that all coffee tickers are interconnected. For example, drought in Africa, where the Robusta variety is produced, leads to an increase in prices for the Arabica variety.

Despite modern technological progress, weather remains the most important factor affecting crop yields.

• The price depends greatly on the specific season. The price of coffee will decrease at the end of the harvest, and on the eve of the new planting season the price will tend to rise.
• The real ratio of producers and consumers at the physical level regulates the cost of coffee. A disproportion on one side immediately leads to a change in price.

Geopolitical factors and possible restrictions on producing countries are more likely to be considered force majeure circumstances, on the same level as war or natural disaster.

What else you need to know about coffee on the stock exchange

In general, the coffee chart is similar to the chart of any other food asset. You can find similar dynamics in the price chart for coffee or wheat. Overproduction creates inflated inventories, which reduce the real value of the product on the market. As soon as these reserves are exhausted, the price passes through an equilibrium state and subsequently begins to rise.

Traders who understand the agribusiness structure in Latin America and Asia will have an added advantage in coffee futures trading. It is important to know how this or that weather will affect the current harvest, in what months the harvesting takes place, what tax burden producers bear and other factors that can be considered fundamental.