Buying and selling coffee as a commodity
Coffee trading has great potential thanks to the constant high demand for this commodity. It makes a good addition to a balanced portfolio containing a combination of currencies and commodities.
Coffee is produced by several countries around the world, the most prominent being Brazil, which significantly outweighs competition from Vietnam, Columbia, and Indonesia.
There are several factors influencing the price of coffee. One of these is the quality of beans themselves. The two most popular varieties are Arabica and Robusta, where the latter commands higher prices due to its better taste and higher cost of production. However, Robusta has a great price advantage, which makes it competitive on the market. The “fair trade” movement has also influenced coffee commodities as it has caused the establishing of fixed minimum prices. Natural disasters and weather conditions also affect this highly seasonal sector as these may influence supply and thus affect coffee prices. As studies are underway investigating potential medical applications for coffee, a positive outcome could result in a spike in the demand for coffee, thus driving prices up.
As coffee enjoys a steady high demand, it is an attractive area for investment. Demand for ethically grown coffee is growing too, within the larger wave toward equality and ethical living. This niche commands higher prices, but enjoys growing demand nonetheless, so it also offers a great investment potential. Many factors are at play in this market, and with the right strategy, profits can be substantial. Both beginner and experienced traders are advised to include this exotic commodity as a part of their diversified portfolio.