Coffee future trading is a fast growing future trade. Like any free-market trades that sprung around the world, it needs to be regulated for better output and services. Coffee traders from around the world also need a common place where they can make their option and transact their usual business. These problems were addressed by the creation of CSCE in 1993. Since then, CSCE served as the main market for coffee, sugar and cocoa future trades.
CSCE is strategically located at Commodity Exchange Center in New York for easy access of the traders worldwide. CSCE serves as the main control that keeps all the futures and options under trade uniform and they see to it that all meet the standards set by the exchange. The grade, locations, quantities and time of delivery are the constant factors that lie in the hands of the CSCE. Price is the only thing that remains uncontrollable by the exchange therefore is open for negotiation. The market is open for ‘price discovery’, which means the price of the coffee and other commodities being traded are allowed to reach their natural levels.
Coffee can be considered as one of the most commonly found drinks at home, next to water. So businessmen waste no time to make coffee as one of the prime commodities to trade in the international market. The abundance of its supply opens up a demand for coffee future trading. The production even the consumption of coffee is greatly affected by the weather condition. Coffees are grown in subtropical areas to yield the most beautiful and high-grade seeds. Most people drink a cup of hot coffee during cold seasons so the demand increases during these times.
The consumption of coffee is not directly affected by its price in the market. The consumers do not even notice the rise and fall of the prices of coffee, unless there’s a drastic change. Extreme increases in the prices as recorded in 1976 and 1977 showed a big drop on its demand. The price of the coffee comes out as agreed by the people in the coffee futures trade. Bidding is done vocally, so the name ‘open outcry’. The bidding gives fair and transparent competition among traders. Each trader can buy or sell their products at the best-offered price. The Exchange for worldwide uniformity will then disseminate the final price around the globe.
Investors and hedgers are the main casts in the coffee future trading floors. Investors take advantages of the changes in commodity prices. Brokerage firms and commissioned merchants course the orders of the investors. These investors also make use of the commodity funds that are managed by Commodity Trading Advisors (CTAs). The hedgers play the other big role in the market scene. Unlike the investors, they are threatened by the changes in pricing. Hedgers are composed of the commercial companies that want to lock in the prices of futures for them to gain in the buy and sell of commodities. Some of these companies are engaged in roasting, importing and coffee-making activities.
Now that you are introduced into the world of coffee future trading, it’s up to you if you want to become an investor or play the game of the hedgers.
Tags: coffee future trading, Commodity Trading
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