Commodity - Coffee demand, production and market summary

Coffee beans provide brisk beverage and most well-liked coffee in the US, sold by leading beverage companies e.g. Dunkin and Starbucks is Arabica.  EU accounts for over 40 per cent of the imports of coffee bean, and the second leading buyer is the US. Post-G7 summit, the US chamber of commerce denounced president Trump’s poor global trade issue handling. Canada, which is one of the members of NAFTA with the US and Mexico, forced limits on American goods of worth Canadian dollar 16.6 billion (to be effective from July 1), that includes coffee. Investment in coffee provides alternative to spread in multiple commodity where one can combine rice, oranges and coffee along with other commodities.  
Arabica is mostly cultivated in Brazil and Columbia.  Coffee grown in the South-East Asian countries is predominantly Robusta; on the other hand, Arabica is mostly grown in the South-America and the North America - Arabica. 
Robusta is, sometimes, referred to as green coffee, and it contains a percentage of caffeine.  Some believe Arabica is superior as compared to Robusta but the market price of Robusta affects the price of Arabica. In terms of business and production, these are roughly same. They can be traded on different exchanges interchangeably, where they can provide options of multi commodity trading.  

Cultivation 

Excessive dryness or freezing temperatures can damage coffee plantation. Coffee is cultivated in more than seventy countries in the Africa, Americas and South-East Asia (Vietnam and Indonesia). 90 per cent is produced in South-America and are, widely, consumed in the Middle-East, South-America and Europe. 
The total coffee yield is expected to exceed 11.4 million bags, in 2018 -2019, due to record output in Brazil. Brazil produces more than 2,595,000 metric tons of coffee.   Brazil the biggest cultivator and exporter, which will have record production and this, will lead to low price and benefit coffee makers Nestle Starbucks and Nescafe. 

Demand 

Coffee shops and brakes are themes for entertainment, socialising and relaxation. Largest buyers of coffee are in the EU, where the per capita coffee intake is highest as compared to rest of the world. 
The biggest coffee drinkers, where, per capita using up, is up to 12 kg per annum, which can be found in Finland. Other largest coffee drinking countries include Norway, Iceland, Denmark and Netherlands. 

Future trade

Coffee can be traded in future where the prices can be highly volatile in a single trading day.  Un-roasted green coffee is the most traded commodity and Coffee future (Arabica) ended in loss in New York in July 2018 due to weakening Brazilian currency.

Arabica fell 3 per cent for September trade and ended at $1.1165 a pound on New York ICE future. The price hit lowest in Jan 2016, when the rate was $1.1155. 

This is a seasonal commodity highly dependent on the climatic factors, and in market, the two options - robusta and arabica that are grown in different geographical regions – provide vivid options of investment where one can gain, while, the other loses.  The various options of investment include future contracts or put option.

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