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ARABICA COFFEE
CONTRACT SPECIFICATION
| Trading Screen Product Name | ICE US Arabica Coffee (Coffee C) | |
| Commodity Code | KCE | |
| Contract Size | 37 500 pounds / lot | |
| Price Quotation | cent / pound | |
| Trading Hours | Monday - Friday: 04:15 P.M - 01:30 A.M (the next day) |
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| Minimum Price Fluctuation | 0.05 cent / pound | |
| Contract Series | March, May, July, September, and December | |
| Delivery Registration Day | The fifth business day prior to the First Notice Day | |
| First Notice Day | Seven business days prior to first business day of delivery month. | |
| Last Trading Day | Eight business days prior to the last business day of the delivery month | |
| Margin | As MXV required | |
| Position Limit | As MXV required | |
| Price Limit |
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| Settlement Method | Deliverable | |
| Quality Standards | No. 1, No. 2, No. 3 Arabica Coffee |
QUALITY STANDARDS
In accordance with the regulations of Arabica Coffee traded on Intercontinental Exchange Futures United States (ICE US).
Product infomation
There are mainly 2 types of coffee: Robusta and Arabica. Robusta contains more caffeine than Arabica. Arabica futures are traded at ICE US exchange (New York) and Robusta are traded at ICE EU exchange (London), the price of Robusta futures is higher than the price of Arabica futures.
Planting place
According to USDA statistics, in the coffee crop year 2018/2019, in Brazil, coffee production reached about 64.8 million bags (accounting for about 37.1% of global coffee production). Coffee production in Vietnam is about 30 million bags (17.4% of global coffee production). Arabica grown in Colombia is harvested with an output of 14.3 million bags (8.2% of global coffee production). Because of the lowest coffee growing area, coffee production in Indonesia is relatively low, about 10.6 million bags, accounting for 6.1% of global coffee production. Thus, the total coffee production in these four regions accounts for about 68.8% of global coffee production. (Refer to Figure 1)
Figure 1: World production of coffee
Harvest
Due to different natural conditions, the coffee season in each country is also different. Coffee price movements are strongly influenced by harvest seasons of different countries. Below is a table of harvest times in major coffee producing countries around the world.
Figure 2: Harvesting seasons in the world's largest coffee producing countries
Processing
In the growing season, coffee berries will be harvested at ripeness because this is the time when coffee berries have the most nutrients. In many material areas, because of different conditions and difficulties in labor, farmers have chosen to harvest all - that is, to quickly harvest all coffee berries on the same branch, including both green and ripe fruits. . This greatly affects the quality of the coffee harvested each year.
Coffee after picking will be processed and dried. Dry coffee beans will be roasted in many different temperature conditions, depending on the needs of the market. Coffee beans after roasting will be ground and brewed with boiling water to create coffee in the form of a drink.
The situation of coffee import and export in the world
Figure 3: Coffee exporting countries in the world
Europe and the United States are the world's largest coffee importers, mainly importing coffee beans. (Refer to Figure 4)
Figure 4: Coffee importing countries in the world
Through analysis, it can be seen that coffee is traded a lot in the world, which means that coffee futures contracts are also traded a lot on the commodity derivatives market. Understanding the coffee value chain and how coffee production is distributed around the world will help producers and investors to trade coffee futures more efficiently.
Factors affecting coffee
* Coffee supply and demand: Currently, the total world supply of coffee is about 165 million bags. While the world's total coffee demand is about 168 million bags, there is an oversupply of about 3 million bags. According to statistics from USDA, coffee consumption demand increases by about 2.5%/year. The supply of coffee is highly dependent on the crop and conditions of the coffee growing countries in the world.
* Weather: Coffee is a tropical plant, so it requires quite high temperature, light, and rainfall. The coffee tree must flower in spring and the weather conditions must be suitable for the tree to bloom successfully. Weather plays an important role in coffee growing countries. Excessive rain or prolonged dry weather can affect harvested coffee production. However, frost is the biggest threat to coffee production.
* Coffee demand: World coffee demand is growing day by day with population growth and people's changing taste. The cup of coffee from 100% Robusta has a bitter taste, strong consistency and high caffeine. But in fact some people don't like the bitter taste of coffee but instead the flavors from Arabica. Arabica offers aroma (with attractive aromas such as floral, fruity, chocolate flavors), mild acidity and lower caffeine content, enough for 2-3 cups a day per person. Arabica has much more acidity than Robusta. European taste buds prefer Robusta coffee while Americans tend to drink Arabica blends.
* Diseases: In addition to weather factors, disease is also a factor affecting global coffee production. Rust is a devastating disease that can destroy crops. Robusta coffee is more resistant to rust than Arabica coffee.
* Oil prices and oil trading in the world: Traders buy coffee from farmers and then ship coffee around the world and therefore, transportation costs are also an important issue. heart. Oil and fuel prices can significantly affect the price of coffee.
* Political stability: More than 68% of the world's coffee beans come from four countries: Brazil, Vietnam, Colombia and Indonesia. If any of the above countries experience political instability, it can affect the situation of coffee production, thereby affecting the supply of coffee in the market. The scarce supply will affect the world coffee price. Therefore, the market reacts very quickly to any event happening in these four countries.
* Other factors: In addition to the above factors, the price of coffee futures contract is also influenced by other factors such as macro information and people's health consciousness. Understanding the factors that affect the price of coffee will help investors analyze coffee futures price movements in the market and come up with effective investment strategies.
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