Softs spread betting markets may also be available through other companies. Notes.
2)Where can I find Live Spread Betting Prices for the Coffee Market?
For Commodities spread bets please see the above tables. Where a company offers the relevant market they will also provide clients with live prices on that market.
3) Where can I find Live Charts / Candlestick Charts for the Coffee Market?
Spread betting companies often offer a variety of free data to their clients (accounts are subject to status, terms and conditions).
The most popular Commodities data, apart from live prices, tends to be the candlestick charts. The time period of the charts can usually be varied. You can often alter the candlestick charts to show market movements in the order of 1 minute, 2 minutes, 5 minutes, 10minutes, 1 hour, 1 day or 1 week periods.
With a number of the charts you can also update the settings to help your technical analysis. For example you can add Bollinger Bands and 20, 50 and 100 point Moving Averages and Commodities candlestick charts are currently available with:
Trading Charts?
Spread betting charts may also be available from other companies. Notes.
Sample Coffee Chart from Financial Spreads:
4) How do you Spread Bet on the Coffee Market to Go Up?
Coffee Spread Betting Example
Should you decide to spread trade on a commodity such as Coffee then, looking at a spread betting website like Capital Spreads, you might find a spread trading price of $1,311 - $1,319.
That means you can spread trade on Coffee to move higher than $1,319 or to move lower than $1,311.
If you are spread betting, you bet on every unit the market rises or falls; with the Coffee market a unit is $1 of the commodity's price movement.
So, you might decide to spread bet £6 for every $1 Coffee increases or decreases.
Buying - Spread Betting on the Market to Go Up
If you were to go long of Coffee at $1,319 and the commodity increased then the spread could move to $1,332 - $1,340. If this were the case, you could decide to take your profits by closing your trade at $1,332.
Profit/Loss = (closing level of the market - opening level of the market) x stake per $1
Profit/Loss = ($1,332 - $1,319) x £6 per $1 stake
Profit/Loss = $13 x £6 per $1
Profit/Loss = £78 profit
Of course, if the market had moved down to, as an example, $1,304 - $1,312, you may want to close your spread bet to limit your losses. Therefore, you would sell the market at $1,304.
Therefore, with the same £6 per $1 stake:
Profit/Loss = (closing level of the market - opening level of the market) x stake per $1
Profit/Loss = ($1,304 - $1,319) x £6 per $1 stake
Profit/Loss = -$15.0 x £6 per $1
Profit/Loss = -£90 loss
5) How do you Spread Bet on the Coffee Market to Go Down?
A key advantage of placing a spread bet is that investors can go short of the markets.
When we began this example, the coffee spreads market was priced at $1,311 - $1,319.
If you were to go short of Coffee at $1,311 and the commodity fell then the spread could become $1,291 - $1,299. Assuming this was the case, you might decide to close your spread bet for a profit at $1,299.
Profit/Loss = (opening level of the market - closing level of the market) x stake per $1
Profit/Loss = ($1,311 - $1,299) x £6 per $1 stake
Profit/Loss = $12 x £6 per $1
Profit/Loss = £72 profit
The markets can of course rise, if the market had risen to, for example, $1,317 - $1,325, you might want to close your spread bet to prevent further losses. If that happened, you would buy at $1,325.
You would do this with the same £6 per $1 stake:
Profit/Loss = (opening level of the market - closing level of the market) x stake per $1
Profit/Loss = ($1,311 - $1,325) x £6 per $1 stake
Profit/Loss = -$14 x £6 per $1
Profit/Loss = -£84 loss
Coffee (Robusta Coffee January) market quoted as of 16-Nov-09.
6) Where can I find more on Spread Betting on Commodities?
If you are new to trading coffee and spread betting on softs then it is always a good idea to have an overview of the basics of the market.
Although the units that commodities are traded in are fixed, when spread betting on commodities you trade in the currency that suits you eg Pounds per unit, Euros per unit or Dollars per unit.
Coffee Arabica is traded in 0.01¢ / lb (pound).
Therefore you could bet €5 per 0.01¢ that Arabica goes up or down. If the price / lb then moved by 0.15¢ then your profit or loss would alter by €5 per 0.01¢ x 15 = €75.
Likewise you could bet £8 per 0.01¢ that Arabica goes up or down. If the price / lb then moved by 0.20¢ then your profit or loss would alter by £8 per 0.01¢ x 20 = £160.
World Coffee Consumption
In 2007 coffee consumption came to 123 million 60kg bags, representing a 1.63% year-on-year increase. America was the largest consumer of coffee in the world representing over 17% of the market. Brazil was the second largest coffee consumer and accounted for more than 13% of global coffee consumption.
US coffee consumption over the past five years has varied between 20 and 21 million bags. However Brazilian consumption has been growing at an average rate of 5% per annum over the past five years, with 2007 growth surpassing the average and growing 6.4% to 17 million 60kg bags. Assuming coffee consumption growth in America remains at current levels, then Brazil could surpass America in being the world’s largest consumer within the next five years.
Germany, Japan, Italy and France are the next major coffee consuming countries; each country consumes between 4% and 8% of total world coffee consumption.
Together, the six countries consumed a total of 65 million bags in 2007, accounting for 53% of the world’s coffee consumption.
Consumption Variables
As Anthony Grech of IG Index reported earlier this year “It is important to note that consumption, or demand for coffee, depends on the price and currency strength in the producing country, versus the importing country’s currency. In addition, consumer tastes, number of substitutes and population growth are some of the major factors that influence demand.”
Input Cost Variables
According to the International Coffee Organisation (ICO) the weakening US dollar and soaring price of oil in 2007 and first half of 2008 has increased coffee production costs. In order to help counter the problem of rising costs in the coffee supply chain, Brazil and Colombia, the largest coffee producers, have been implementing compensatory schemes. The Brazilian authorities recently renewed their ‘PEPRO’ programme, which aims at supporting coffee prices through auction sales, and the Colombian government has been reimbursing coffee growers up to 24% of their annual fertiliser costs. Such government compensatory schemes are likely to continue supporting coffee supply.
Coffee Production Growth
On a global scale, the ICO predicts that world coffee production in crop year 2008/2009 is to rise by around 3% to 127 million 60kg bags.
Supply and Demand
The rate of consumption has been growing at an average of 2% pa over the past five years. Assuming that consumption continues to grow at the same rate then it could rise between 125 million and 126 million 60kg bags in 2008/2009 and to 127 million and 128 million bags by 2009/2010. This is roughly in line with the estimates provided by the ICO, which predict world consumption to reach 125 million bags in 2008/2009 and 127 million bags in 2009/2010.
Coffee Pricing and Quality
Note that if you are spread betting on Coffee that there are two types of coffee that you can trade, Robusta and Arabica.
Robusta is the lower quality coffee and accounts for approximately 40% of world coffee production and is more likely to come from Vietnam and Indonesia.
Arabica is the higher quality coffee, accounts for 60% of World Coffee production and is more likely to come from Brazil and Colombia.
Note - Spread Betting carries a high level of risk to your capital and you can lose more than your initial investment, it may not be suitable for all investors. Ensure you only speculate with money that you can afford to lose and that you fully understand the risks involved and seek independent financial advice where necessary.
'Coffee Spread Betting', Feature by D. Jones, last update: 19-Jan-12
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