Coffee is not only a valuable commodity but also an important investment tool in the context of increasingly volatile global economic conditions.

Coffee is considered one of the most important commodities in the world due to its crucial role in daily life and the global economy. Widely consumed across continents, coffee is not only a popular beverage but also a high-value economic product. It is a primary source of income for millions of farmers in developing countries, contributing to economic development and poverty reduction. Additionally, the coffee industry creates millions of jobs in areas such as cultivation, processing, distribution, and retail.

Originating from Ethiopia, coffee has become an integral part of the culture and life in many countries. It is now predominantly grown in tropical countries, with Brazil, Vietnam, and Colombia being the largest producers. There are two main types of coffee traded on the market: Arabica and Robusta. Arabica, which accounts for about 60-70% of global coffee production, is favored for its delicate flavor and mild acidity. Robusta, with higher caffeine content, is often used in instant coffee production and has a stronger, more bitter taste.

Similar to crude oil, coffee is also a significant investment asset, providing profit opportunities through price fluctuations while helping to diversify investment portfolios and mitigate risk. Coffee price volatility is influenced by factors such as weather, trade policies, and currency fluctuations, presenting both opportunities and challenges for investors.

Regarding coffee consumption trends, an analysis of Robusta coffee seasonality from Century Financial highlights that 7 out of 10 coffee-consuming countries are located in the Northern Hemisphere, accounting for more than 50% of global consumption. On the other hand, coffee consumption typically peaks during the cooler winter months and naturally declines during the warmer summer months. Data shows that global coffee consumption usually decreases by 12% or more during summer months.

Europeans also tend to prefer the strong, high-caffeine flavor and bitterness of Robusta, while Americans favor the milder, sweeter flavor of Arabica. Consequently, in Europe, Robusta prices are higher than Arabica prices, whereas in America, Arabica prices are higher than Robusta prices.

In Vietnam, coffee is believed to have been cultivated since the 19th century, but it gained popularity in the 1980s as demand increased with economic development, according to an article in Nikkei Asia. Additionally, coffee consumption in Southeast Asian coffee-producing countries previously consisted mostly of lower-quality coffee not suitable for export. However, with the growth of Starbucks and other coffee shops, local demand for high-quality coffee beans is rising.

Currently, the coffee market is attracting interest from many investors in Vietnam. With its growth potential and appealing investment opportunities, coffee is not only a valuable commodity but also an important investment tool in the context of increasingly volatile global economic conditions.

“The coffee market was valued at $79.5 billion in 2022, $83.6 billion in 2023, and is projected to reach $112.8 billion by 2030.”

Source: Internet

Additionally, according to the USDA report from December 2023, Vietnam is the second-largest coffee exporter in the world. In 2022, exports reached approximately 1.78 million tons, exceeding $4 billion. By 2023, exports were 1.61 million tons, but due to a significant price increase, export revenue reached a new record high of $4.18 billion.

Currently, coffee derivative products primarily include futures contracts and CFDs (Contracts for Difference). Each type of trading has unique characteristics and suits different investment objectives.

Coffee futures contracts are widely traded on ICE (ICE Futures Europe, ICE Futures US) and B3 Brazil (Brazil Stock Exchange and Over-the-Counter Market), allowing investors to buy or sell coffee at a specified price at a future date. Futures contracts are an effective tool for price risk management, particularly for coffee producers and exporters. They help ensure a stable selling price and reduce risk from price fluctuations. According to ICE data, Arabica coffee futures have high trading volumes and liquidity, facilitating investor participation.

A typical coffee derivative product on ICE US is the Arabica coffee futures contract. The contract specifications are illustrated as shown in the table below:

Source: MXV

CFD trading allows investors to trade based on coffee price fluctuations without owning the underlying asset. CFDs offer high flexibility, enabling investors to easily access the market and use financial leverage to enhance profits. However, CFD trading also involves higher risks due to leverage and significant price volatility. Investors need extensive knowledge and careful risk management when engaging in CFD trading.

For example, the XTB platform provides a description of CFD trading as shown below. The spread is the smallest difference between the Bid price (selling price) and the Ask price (buying price); for instance, if the Ask price of Gold is 1,975.50 and the Bid price is 1,975.95, the spread is 45 cents.

Source: Internet

Source: Compiled