Can anyone help me understand the futures market?

[miabbett]

Hey everyone! I've read up on the futures market a fair amount recently, but I was wondering if anyone can help me understand how strong of an indicator it really is. As I've mentioned before on this forum, I'm in the process of buying and importing Ethiopian coffee to the US, and the seller has given us a price of about $2.75/lb. The coffee is Fair Trade, Rainforest Alliance certified, UTZ organic certified, and was recently received a cupping score of 86.5; so our coffee is pretty good. That being said, is $2.75/lb too much to be paying for it? I know the NY coffee futures market deals with mild Arabicas, but are they as high of quality as our coffee? Any help would be greatly appreciated!!

 

[champaigncoffeeco]

I think given all the certifications, you're probably ok at that price. As of 6/25, "C" is at $1.58/lb, so the important thing is to watch the relationship between what you're paying and the price of the futures. If "C" moves down $.10 and your seller wants to go up $.20, you might want to ask them why.

I wouldn't spend too much time worrying about the futures price if you're dealing in high grade coffee. You should look at what you can expect to sell your coffee for based on what comparable coffees are selling for in your area, then decide if the price is reasonable enough to attain your desired margin.

Just my two cents. Maybe an experienced importer can shed some more light.

 

[miabbett]

Thanks for the great help. I was thinking along those same lines. If anyone else has input, it would be greatly appreciated

 

[expat]

Futures market explained.
Scenario 1: buy low, sell high
Scenario 2: lose all your money

 

[aafreen]

welll. it cant be predicted at all. because of high volatility

 

[Frank_Cannon]

A lot of people say the futures market is rigged by the big players so wouldn't be that strong an indicator of the price you should be paying for your physical coffee. That said aren't you better off just getting several quotes and making sure the price you are getting is reasonable. Its hard to imagine that any one supplier in your area has a monopoly.

 

[namballe]

how many quintals are you buying from the supplier? that is also a factor in the $ per #.

 

[PinkRose]

Quintal .....I have to admit I had to look that one up!

The quintal or centner, from Latin centenarius ("hundredlike"), is a historical unit of mass in many countries which is usually defined as 100 base units of either pounds or kilograms.

I seem to learn something new every day on this Coffee Forum!

Rose

 

[CanadianBrian]

I agree that quantity has a bearing on price, but you do not mention the quantity that you are buying. From all of the certs it would seem like a reasonable price. And as far as the futures market it is like comparing apples and "exotic, organic" etc apples. Futures don't have much meaning to most specialty coffee people as we are not buying in container loads or that quality of beans.
Brian

 

[namballe]

Quintal .....I have to admit I had to look that one up!

The quintal or centner, from Latin centenarius ("hundredlike"), is a historical unit of mass in many countries which is usually defined as 100 base units of either pounds or kilograms.

I seem to learn something new every day on this Coffee Forum!

Rose

in South America 1 quintal=46 kilos/100 lbs.
i buy my coffee (in the parchment shell) in quintals direct from the grower.