General presentation of coffee:
When we think about agricultural commodities, we do not immediately think about coffee. However, coffee is no less than the main internationally traded agricultural commodity in terms of volume.
There are different sorts of coffee, Arabica which is the most popular and represents 70% of the total production and Robusta which represents only 30% of the world production. We estimate that the world annual production is around 120 million bags. The bag is the unit of measurement of coffee and represents a volume of 60 kg. This production is spread on several continents mainly in South America in Brazil and Colombia and in Asia in Vietnam.
Coffee on the stock market in a few figures:
The annual world production of coffee is around 130 million bags, knowing that a bag represents 60kg of coffee. The main producer of coffee today is Brazil, followed by Vietnam, Colombia, Indonesia and Ethiopia. But most of the exportation of coffee to other countries of the world is made by Brazil and Vietnam.
As for the countries that consume the most coffee, they are the United States, Germany, Italy, Japan and France.
The price of coffee is listed in two different markets depending on its quality. Thus, Arabica is listed on the London ICE (London Intercontinental Exchange) in dollars per pound, while Robusta is listed on the Euronext Liffe in dollars per ton.
It is interesting to notice that coffee is currently the most traded agricultural product in the world.
The supply and demand of coffee in the stock market:
The supply of coffee is mainly composed of Arabica, which accounts for almost 60% of the world’s production of this raw material and which is mainly produced in Latin America. The Robusta is cultivated in Africa and Asia. It is interesting to notice that Vietnam is a recent player in the production of coffee and is currently one of the leaders in this sector.
As for its demand, it comes mainly from the European Union, the United States and Japan.
The ranking of coffee on the market of raw materials
The price of coffee is quoted on the American market NYMEX or New York Mercantile Exchange on which its prices evolve continuously every day depending on the supply and demand.
Several elements influence the price of coffee live, among those elements we can mention:
- The technical indicators that are particularly followed by short term traders.
- The statistics on the global demand of coffee
- The statistics of the global production of the major exporting countries such as Brazil and Vietnam.
- Meteorogical phenomena that influence the production of coffee in these exporting countries.
- The value of the American dollar against other currencies on Forex
- The evolution of other agricultural commodities on the NYLEX market.
By combining the indicators of the technical analysis with those of the fundamental analysis, it is relatively easy to predict the online price of coffee, whether in the context of long term or short-term strategies.
An appropriate analysis of the online price of coffee:
First of all, and in order to carry out an appropriate analysis about the online price of coffee, you need to find the right graphics to obtain accurate information in real time. Since the price of coffee is extremely volatile it is essential to know the different movements and micromovements of the market.
It is also better to use charts that include analysis tools such as the level of support and resistance, moving averages or even pivot points, which will help you determine what is the best position to adopt and the right moment to trade coffee.
Analysis of the history of the price of coffee on the stock market charts:
It is particularly interesting to analyze the history of the price of coffee and particularly the variations that have taken place in the last years.
In fact, from 2011 to February 2014, the price of coffee had a sharp drop, which led it below the mark of $1, reaching the its lower price in history $0.87. But following this downtrend, we could observe an increasingly marked volatility on this asset with very radical bullish and bearish movements over short periods.
This volatile evolution represents excellent trading opportunities for investors who use short term strategies, especially with CFD’s. Even if this volatility is a little bit less pronounced at the moment, coffee remains a raw material that you should trade.
It seems evident from these historical data that the price of coffee is especially influenced by psychological factors of the market. Investors based mainly on the chart indicators to program their positions on this asset.
Fundamental analysis of Coffee online:
Of course, the technical analysis of the online price of coffee is not enough to allow you to carry out a complete strategy. This has to be complemented with a fundamental analysis aiming to understand and to anticipate the events that influence the purchase or sale of coffee.
You can find information about this market on specialized websites or by subscribing to a specific newsfeed.
Indicators that you should follow when trading coffee:
Trading coffee is, just like any the other raw material, speculating on the evolution of its supply and demand. In order to do this, you just have to take into account the different indicators, here are the main ones:
- The volume of exports and imports are very important and is the main global indicator.
- You should also take into account the meteorological conditions that could affect production. Big changes or natural disasters could in fact quickly increase the price of coffee.
- Global production could also allow you to anticipate an increase or decrease in supply and demand.
- Finally, the stocks are an indicator of past consumptions based on the expectations of economist or about an eventual revision of the volumes that are to be produced.