Why is coffee an interesting asset?
Coffee is not only the morning beverage that drives the world: it is also one of the most traded commodities on the planet. It is estimated that every day more than 2 billion cups of coffee are consumed in the world, and this makes it an asset with high liquidity, constant demand and a global market in permanent movement.
From a trading standpoint, coffee stands out for several reasons:
- Attractive volatility: factors such as weather, geopolitics, and harvest conditions can move its price significantly in short periods.
- Portfolio diversification: by trading coffee, traders can reduce their exposure to traditional financial assets such as stocks or currencies.
- Seasonal cycle: coffee exhibits behavior patterns linked to harvests and seasons, allowing the development of strategies based on seasonality.
For traders looking to take advantage of short or medium-term opportunities, coffee represents a dynamic market with unique characteristics.
Brief history of the coffee trade
Coffee has a history as rich as its aroma. Originating in Ethiopia, its cultivation and consumption quickly spread to the Arab world in the 15th century, and from there to Europe, Latin America and Asia. Over time, the coffee trade became a key economic engine for countries such as Brazil, Colombia, Vietnam and Indonesia
With the rise of financial markets in the 20th century, coffee went from being an agricultural product to a financial instrument traded on international exchanges, such as the ICE (Intercontinental Exchange) in New York and London. Today, thousands of traders speculate daily with its price through futures contracts and CFDs (Contracts for Difference).
What is interesting is that, although coffee is a “soft” commodity, with agricultural roots, its behavior in the markets reflects dynamics as complex as those of traditional financial assets. This makes it an ideal entry point for learning about commodity trading.
What are Coffee Futures?
What are Coffee Futures? Coffee futures are standardized financial contracts that obligate the parties to buy or sell a specific quantity of coffee at a future date, at a previously agreed price. These contracts are traded on regulated exchanges and are used both by producers and importers for hedging purposes, as well as by traders to speculate on price movements.
The appeal of futures trading lies in its liquidity, transparency and leverage, but it also requires a good understanding of the underlying product.
☕ Types of Coffee: Arabica vs Robusta
The two most important types of coffee in the financial market are:
| Coffee Type | Features | Major Producers | Stock Exchange |
| Arabica | Smoother, more aromatic flavor, higher quality, more sensitive to climate | Brazil, Colombia, Ethiopia | ICE – New York |
| Robusta | Stronger and more bitter flavor, higher caffeine, more resistant | Vietnam, Indonesia, Uganda | ICE – London |
Arabica accounts for approximately 60-70% of the world coffee trade, and is preferred by most consumers.
Robusta is cheaper and is commonly used in instant coffees and blends.
Where are coffee futures traded?
Coffee futures contracts are traded mainly on two international exchanges:
- ICE Futures U.S. (New York) – for Arabica Coffee Contracts
- ICE Futures Europe (London) – for Robusta Coffee Contracts
ICE Futures Europe (London) – for Robusta Coffee contractsThese exchanges establish the terms of the contract, including size, coffee quality, delivery date and physical delivery location (although most trades are closed prior to delivery).
Contract Specifications
Arabica Coffee – ICE NY Contract
- Contract size: 37,500 pounds (approx. 17 tons)
- Unit of quotation: U.S. cents per pound
- Months of maturity: March, May, July, July, September, December
- Minimum price variation (tick): 0.05 cents/lb = $18.75 per contract
Robusta Coffee – ICE London Contract
- Contract size: 10 metric tons
- Unit of quotation: USD per metric ton
- Expiration months: January, March, May, July, September, November
- Minimum Tick: $1 per ton = $10 per contract
Traders should note that these contracts are designed for large volumes and therefore require significant capital or a platform that allows splitting (such as CFDs).
🌍 Factors Affecting Coffee Prices
El precio del café, como el de muchos commodities, está sujeto a una combinación de factores que van desde el clima hasta la economía global. Entender estos elementos es clave para tomar decisiones informadas en el trading, ya sea con futuros o CFDs.
☁️ 1. Climatic Conditions
Coffee is extremely sensitive to climate, especially Arabica. Droughts, frosts, unseasonal rains or pests can severely affect the harvest, generating abrupt price movements.
- Brazil, the world’s largest producer, often sets the tone. For example, a hard frost in Minas Gerais can send global prices soaring in a matter of days.
- Events such as El Niño or La Niña can alter rainfall patterns in key regions.
📌 For the trader: following agricultural weather reports is a strategic advantage.
🌐 2. Global Supply and Demand
- Constant demand: More than 2 billion cups of coffee are consumed every day. The growth of coffee shops, delivery and consumption in emerging countries is driving this trend.
- Volatile supply: Although there are many producing countries, production remains concentrated in a few: Brazil, Vietnam, Colombia and Ethiopia.
🧠 A glut can depress prices, while a shortage or strike in a key country can push them up.
3. Economic Data and Exchange Rates
- A strong dollar generally puts downward pressure on the price of coffee (and other commodities), as it is priced in this currency.
- Un dólar fuerte suele presionar a la baja el precio del café (y de otros productos básicos), ya que se cotiza en esta moneda.
💼 4. Production and Logistics Costs
- Increased fertilizer, shipping or fuel costs can raise coffee prices.
- Logistical disruptions, such as port strikes or global bottlenecks (e.g. Panama Canal), can also affect available supply.
📰 5. Political and Social Factors.
- Harvester strikes, internal conflicts in producing countries or regulatory changes can impact production.
- Trade agreements or export/import restrictions influence the global chain.
In short, coffee is not only affected by its quality or volume, but also by a complex web of global variables. For a trader, being up-to-date with the macroeconomic and geopolitical context can make the difference between anticipating or reacting.
Coffee CFD Trading: A Flexible Alternative
Although coffee futures are the traditional way to trade this commodity, not all traders have the capital, experience or leverage necessary to access these contracts. This is where CFDs (Contracts for Difference) come in as a more accessible, flexible and adapted alternative for the retail trader.
💡 What is a CFD?
A CFD is a financial instrument that allows you to speculate on the price of an asset – in this case, coffee – without the need to physically own it or commit to an expiration date. What you do is negotiate the difference between the entry and exit price of the asset.
✅ Advantages of CFD Coffee Trading
- Accessibility
You can start with reduced capital, without the need to invest in a full contract as in futures. - Leverage
Allows you to open larger positions with less capital, increasing profit potential (but also risk). - Long and short positions
You can earn whether the price of coffee goes up or down, which provides opportunities in any type of market. - No expiration dates
You don’t have to worry about expiration dates or physical delivery of coffee. - 24/5 trading
Many brokers allow coffee CFDs to be traded at almost any time of the day, depending on the underlying market.
⚠️ Considerations and Risks
- Maintenance costs: if you keep the position open for several days, you may incur overnight interest (swap fees).
- Increased exposure to risk: leverage can work for or against you; poor management can quickly deplete your capital.
- Broker dependency: execution, spreads and conditions depend directly on the CFD provider you use.
🛠️ Where can I trade coffee CFDs?
Plataformas como MetaTrader 5 a través de brokers como 24Five permiten operar CFDs de commodities, incluido el café. Estas plataformas suelen ofrecer gráficos en tiempo real, herramientas de análisis técnico y ejecución rápida, ideales para traders activos.
In summary, CFDs offer a modern, accessible and versatile way to participate in the coffee market, ideal for traders seeking flexibility without losing access to global price movements.
📊 Technical and Fundamental Analysis Applied to Coffee
📊 Análisis técnico y fundamental aplicado al café
🔍 Fundamental Analysis of Coffee
Fundamental analysis is based on studying the economic, political and climatic factors that affect the supply and demand of coffee.
Variables to be followed:
- Agricultural climate reports from Brazil, Colombia and Vietnam.
- Inventories certified by the ICE (Intercontinental Exchange).
- Global coffee exports and imports.
- Macroeconomic data: dollar/Brazilian real exchange rate, interest rates, inflation.
- Consumer trends: increased demand in emerging countries or changes in consumer preferences.
📌 Practical tip: sites such as the USDA (US Department of Agriculture) or ICO (International Coffee Organization) reports offer periodic key data.
📈 Coffee Technical Analysis
This approach focuses on price behavior through charts and indicators. It is ideal for determining entry and exit points, especially in intraday or swing trading.
Common technical indicators:
| technical indicators: | What is it for? |
| Moving Average (SMA/EMA) | Detect important trends and crossovers |
| RSI (Relative Strength Index) | Identify overbought or oversold |
| MACD | Confirm trend changes |
| Bollinger Bands | Visualize volatility and possible range breaks |
| Support and resistance | Detect key rebound or breakout zones |
🧠 Expert tip: coffee prices tend to move in seasonal channels – use them to your advantage by combining weather data with technical zones.
Example
Suppose that:
- Brazil announces severe drought in Arabica-producing areas.
- RSI is oversold.
- The price is approaching a historical technical support zone on daily charts.
➡️ You could consider a long entry (buy) with stop loss below support and target at the 50-period moving average. If the weather data is confirmed, the price could react quickly to the upside.
The power is in the combination: using fundamentals to understand the “why” of the market and technical analysis to know the “when and how”.
🧠 Popular Strategies to Operate Coffee
The coffee market offers many opportunities for both short and medium-term traders. Below, we explore the strategies most commonly used by traders trading coffee futures or CFDs, adaptable to your trading style, risk profile and time availability.
⚡ 1. Seasonal Swing Trading
It takes advantage of seasonal coffee patterns, especially those related to harvests in Brazil and other producing countries.
- When to use: weeks or months before/after key harvests (April-July in Brazil).
- How to apply it: identify historical cycles where coffee tends to go up or down and combine it with technical signals such as moving average crosses or channel breaks.
💡 Example: if prices historically rise post-harvest due to reduced supply, you can go long after a confirming technical signal.
⚔️ 2. Operating with Climate News
Weather can brutally alter the price of coffee. Many traders react to unexpected news about frost, rain or drought.
- Advantage: fast and potentially strong movements.
- Risk: high volatility, requires strict risk management.
- Tips: subscribe to agricultural weather alerts and use pending orders to react quickly.
📌 Recommended tool: AccuWeather agricultural or USDA weekly reports.
3. Technical Trading with Support/Resistance Zones
The price of coffee respects certain technical levels very well. You can design a strategy based solely on price action.
- Strategy: buy near support, sell near resistance, with confirmations such as engulfing candlesticks or hammers.
- Complements: RSI, Bollinger Bands or Japanese candlestick patterns.
💡 Tip: use 4H or daily timings for greater reliability.
📊 4. Scalping en CFDs
If you are experienced and trade in active sessions (such as NY open), scalping on 1M or 5M charts can offer quick entries.
- Advantage: multiple small operations with cumulative potential.
- Requires: excellent execution, low spreads and steel discipline.
⚠️ Not recommended for novice traders.
🔄 5. Correlation Strategy
Coffee has a certain inverse correlation with the US dollar. When the USD strengthens, it tends to put downward pressure on commodities.
- Use: combines analysis of the dollar index (DXY) with coffee behavior to anticipate movements.
- Complement: technical analysis on both assets.
In short, there is no single ideal strategy. The key is to test, adjust and master one or two that suit you, taking advantage of the volatility and particularities of coffee as an asset.
