Can You Make Money in Coffee Futures?

One of the most consumed beverages worldwide is coffee. The 2019/2020 harvest year saw the production of about 164 million bags of coffee, according to the International Coffee Organization. It is hardly unexpected that coffee futures are traded on significant commodity exchanges around the world given its popularity. But is it possible to profit from trading coffee futures?

Coffee futures are contracts that let traders purchase or sell coffee at a certain price and date in the future. Knowing the coffee market and being prepared to accept risks are prerequisites for trading coffee futures. Weather patterns, supply and demand, and geopolitical events are a few of the variables that might have an impact on coffee prices. Coffee futures can therefore be unpredictable and dangerous, but they can also be rewarding for traders who can foresee market patterns.

You must have an account with a brokerage company that provides access to commodity markets in order to trade coffee futures. You can place orders to purchase or sell coffee futures contracts once you have an account. Each contract for coffee futures represents 37,500 pounds of coffee, and the price is expressed in US dollars per pound. The minimal price variation is 0.05 cents per pound, which translates as a gain or loss of $18.75 per contract for a change of 0.05 cents.

The type of coffee, the area where it is cultivated, and other factors all affect the price. The cost of Arabica coffee, which is the most popular variety of coffee, was about $1.35 per pound as of April 2021. Comparatively, the price of high-quality Colombian coffee beans can range from $1.50 to $2.00 per pound, depending on the grade and other elements.

Kopi Luwak beans, which are derived from Asian palm civets’ excrement, are used to make the priciest coffee in the world. These beans are pricey because they are hard to find and unusual. One of the priciest drinks in the world, a pound of Kopi Luwak coffee may cost up to $600.

In conclusion, people who are ready to take risks and have a solid understanding of the coffee market may find success trading coffee futures. Coffee prices vary depending on a number of variables, but futures contracts for coffee are quoted in US dollars per pound and each contract equals 37,500 pounds of coffee. Although coffee futures carry some risk, they also provide traders the chance to profit from market trends.