Coffee on the stock exchange
With 400 billion cups of coffee consumed every year across the globe, coffee is the second most-traded commodity after oil. When shopping, you have undoubtedly noticed that the price of coffee changes sometimes. This variation is due to the fact that the price of coffee is determined at the stock exchange according to several factors, mainly origin, quality, and supply. Arabica green coffee is traded on the New York C-Market, while robusta green coffee is traded on London’s Liffe market. Let’s have a look at how the arabica market works.
To simplify things, C-Market is like an electronic auction. Prices are determined at this market, which operates from 3:30 A.M. to 2:00 P.M. so that everyone can participate, no matter what time zone they are in.
Every contract bought on the C-Market allows a buyer to acquire 37,500 pounds of arabica coffee beans. The contract also determines the price at which the buyer can obtain a certain quality of coffee (without being tied to one producer in particular) and buyers purchase long-term contracts to protect themselves against the impact of price fluctuations.
Most producing countries grow different qualities of products, ranging from coffee that is mediocre in appearance and flavour, to elite or specialty coffee. Because the name of the country alone is rarely a sufficient guarantee of the quality of the product, a more thorough description is needed (taste, size, etc.). Coffees are given grades; to do this, producing countries choose the type(s) of classification which they deem appropriate. Coffees are classified on the basis of defects, region, bean density, growing altitude and/or bean size. Other types of classification exist, but are less common, such as classifying by taste or colour.
A coffee producer can demand a higher price for a lot than that determined by the C-Market. This is what often happens with higher grades of coffee: a premium is added to the C-Market price and must be paid by the buyer.
Thus, the price of your coffee is determined by the C-Market. Van Houtte’s role is to choose the right quality and quantity according to your favourite recipes!
Have a good coffee!