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Two main types of bean dominate trade; the smoother and more expensive Arabica and as the name suggests, the more robustly flavoured Robusta coffee. Many brokerages will quote prices for one or the other, and even a coffee spot price product will usually be based on either an Arabica or Robusta future.

Like gems, coffee beans are graded based on the level of imperfection they carry; grade 1 is the highest quality coffee with minimal faults, while grade 5 is low quality coffee. The benchmark price for coffee is set at commodity exchanges; for instance, grade 3 washed Arabica beans are traded on the New York Mercantile Exchange and all the other grades are priced either at a surplus or a discount to that price. Robusta coffee is traded in London.

The coffee tree is a sensitive plant that likes only warm climates without frost. Fifty-three countries grow coffee and all of them are located near the equator. Brazil is by far the biggest producer, followed by Vietnam, Indonesia and Columbia. Arabica grows mostly in Latin America and Eastern Africa while Southeast Asia is the home of robusta.

It takes three to five years for a coffee tree to reach maturity and a fully mature tree will produce about a pound of packaged coffee per year. At harvest time the green beans are traditionally hand-picked although coffee farmers are increasingly moving towards strip picking, leading to a total harvest of some seven million tonnes of green coffee beans per year.

Coffee Prices

Coffee prices on the world markets depend on steady supplies; extremes of weather in the producing countries, pests and diseases can reduce supplies and lead to higher prices. The International Coffee Organisation, an association of coffee producing countries, is a good source of statistics and information on coffee production levels.

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Stuart Fieldhouse

Stuart Fieldhouse has spent over 20 years in journalism and financial communications, including six years as a wealth management correspondent for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong.

Stuart has worked as head of content at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Stuart continues to work with hedge funds, private banks, stock exchanges and other financial institutions on their communications, data and marketing requirements.

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