The coffee commodity futures markets determine the future price of coffee and, more importantly, protect producers and purchasers of coffee from wild price swings. In addition to hedging opportunities, the coffee futures markets allow individual investors to profit from coffee price variations.
The most liquid coffee futures contract is available on the Intercontinental Exchange (ICE), which assumed tradability of the coffee contract when it acquired the New York Board of Trade (NYBOT).
Take a look at its contract specs:
Contract ticker symbol: KC
Contract size: 37,500 pounds
Underlying commodity: Pure Arabica coffee
Price fluctuation: $0.0005 per pound ($18.75 per contract)
Trading months: March, May, July, September, and December
This price chart gives you an idea of the performance of the coffee futures contract in recent years.
Because of seasonality, cyclicality, and geopolitical factors, coffee can be a volatile commodity subject to extreme price swings. Make sure to research the coffee markets inside and out before investing.
