Odds are you drink coffee. Simply put, it is the second most consumed hot beverage on the planet; it doesn’t matter if you like it in the form of a Hazelnut Latte at Starbucks or a plain old black coffee in the confines of your office or home.
Ever since the late 15th century when the first Coffee shop (beating out Starbucks by a mere 5 centuries) opened in Constantinople (better known these days as Istanbul), the rich drink was imported from the hills of Ethiopia in the form of small black beans.
While initially used for religious purposes it gradually gained popularity throughout the Ottoman Empire and became known as “the” drink for sultans and kings throughout western culture.
Anyone that has ever drank a cup of the stuff can hardly deny its almost immediate effects on one’s energy levels and alertness, Coffee, quite simply causes a chemical reaction in our bodies, one that causes the body to produce extra adrenaline and release it into our blood stream, giving us an nearly instant boost, that being the case it is hardly a wonder it’s the beverage of choice for late night workers, students on a deadline and people with early shifts all over the world.
Coffee is primarily produced in South America, West and central Africa and some Asian countries (Vietnam & Indonesia), with Brazil being the clear cut leader, producing more than twice the amount of Coffee per year as its nearest rival.
As one can expect with such a commodity, it is mostly subject to price shifts due to consumption, both present and future, but can also be swayed by some seemingly less obvious factors such as weather patterns (that affect its growth or the ability to harvest it) and sometimes even trade agreements that provide preference to importing or export from a certain nation.
There are two primary types of Coffee beans – Arabica and Robusta, Arabica beans are grown primarily in South America and command the higher market price due to their quality, but also due to the fact that labor is more costly, it is that very same higher quality & price that have allowed Vietnam (mostly) to provide a cheaper alternative in the Robusta beans.
There are for major companies that control the world’s Coffee market – Kraft, Nestle, Proctor & Gamble and Sara Lee, combined, those companies account for some 50% of the world’s Arabica supply.
When approaching the Coffee trading market, one should consider a few items that would help in predicting the prices:
Global consumption – the latest and greatest increase in Coffee prices occurred around 2005 when both Russia & China experienced massive increases in their yearly consumption, causing a rise in prices from 78 u.s cents per pound to 101 u.s cents per pound.
Weather reports – Russian’s & Chinese new found affection for Coffee wasn’t the single source of blame – harsh weather in certain production areas caused the 2005 harvest to be about 10%-20% lower than years past, which in turn assisted the rising prices worldwide.
But consumption & weather are not the only factors one should heed when considering trading in Coffee binary options, some other indicators include the rising use of fair trade coffee, which is far more expensive, in addition, the rise of specialty shops such as (but not limited to) Starbucks can also have a vast effect, as those shops usually have individual contracts with growers of Coffee, decreasing the amount readily available for normal trade.
While not considered a very volatile commodity, one should pay attention to those factors when trading Coffee and looking to take advantage of upcoming shifts in prices.
And who knows? Maybe the next thing you wake up and smell will be money, not Coffee…
Start trading Coffee binary options now.