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CTRM for Ags & Softs

measure to the trading and merchandising side . Furthermore , trading practices can be different in different geographical regions and vary with the type of trade . Some merchants and coffee roasters have blending processes as part of their trading processes adding complexity . The supply chain is also complex to manage requiring flexible logisticsfunctionality including splitting and / or combining containers , truckloads or even pallets .

In a world of volatile coffee prices , hedging and risk management are important even on small volumes ; although , there has also been a trend towards specialty coffees sold using samples . A growing number of coffee roasters that deal in small farm-produced and best-flavored coffees are now seen to be leaving the traditional , and more volatile , futures market , which they say has become so disconnected from their business models that it is no longer useful to manage risk . This rise in demand for specialty coffee , now one of every two cups in America , has upended the coffee market as producers are choosing to invest directly with farmers and take the investment risk alone rather than experience the sharp price volatility in the futures markets — traditionally used as a hedging tool against price fluctuations . Hedge funds and other speculators now represent 22 % of bets in the coffee market , compared with 16 % a year ago , according to data from the U . S . Commodity Futures Trading Commission . Merchants and producers who deal in coffee futures now make up 38 % of the market , against 46 % last year . However , the number of outstanding contracts in the coffee-futures market is up 56 % since 2006 as more coffee is consumed in the world . The New York Mercantile Exchange ( NYMEX ) remains the most prominent exchange for trading coffee and its corresponding futures contracts . The prices of the coffee futures contracts on this exchange are a benchmark for other prices around the world .

Similar to the majority of soft commodities , weather is the most important price factor . Poor weather can cause severe damage to the crops , and a lower harvest will impact supply and demand , causing a rise in prices . A limited number of production countries also influence the prices of coffee . This reliance on major producing countries can have an impact on the prices .

The correlation between the two types of coffee , Robusta and Arabica , is an important factor in the creation of coffee prices . With rising demand for one coffee type , the corresponding price will rise accordingly . The demand for the opposite coffee will decline , and the price for this commodity will decline in a similar fashion . Monitoring both types of coffee can therefore be an important indicator for future prices .

There is also a fair trade aspect to coffee that seeks to verify working practices by origin and throughout the supply chain .

Types of Entities Involved in Coffee Trading

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Inspectors Exporters / Importers

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