Coffee Beans

Commodity Challenge
By: Candice Hudak

Part 1:
1. Choose a Commodity.
The commodity I choose was coffee beans.

Part 1:
2. Why Coffee Beans?
Coffee beans are used to make coffee, which is
something I drink almost everyday. I want to discover more
about how different commodities are traded and sold. I feel
that using a commodity that I use and love would make me
even more interested in this project.

Part 1:
3. Coffee beans are produced around the world, but the main
producer is Brazil. After the beans are produced and
collected they are packaged and sent to stores and
restaurants, where people will by either the beans or coffee
made from the beans. The restaurants and store that
distribute these beans and or coffee include many different
companies such as Starbucks and Walmart. Coffee beans are
used to make coffee which allow people to stay awake or wake
up.

Source for part 1

Source:
-

http://www.ncausa.org/About-Coffee/Coffee-Around-the-World

Part two:
1. - Supply
a.
b.

Supply is the quantity of a product (or service) that sellers are

willing and able to provide to the market at a given price.
Supply is the amount of product made available.

2. -Demand
a.
b.

Demand is the quantity of a product (or service) buyers are willing

and able to purchase from the market at a given price.
Demand is the amount of product consumers are willing to buy.

3. -Market Price
a.
b.

Market Price quantity supplied equals the quantity demanded.

Market PRice is the price a commodity is sold for.

2.

Part Two:

economic factors
Demand:

Supply:

- Number of Sellers
- Price of other goods
- Technology
- Producer expectations
- Taxes and Subsides

-Number of consumers
-Price of related goods
-Tastes and Preferences
-Consumer expectations
-Income

Buyers and Sellers

Buyers:
-McDonalds

Sellers:
- Starbucks

-Starbucks

- Folgers

-Dunkin Donuts

-Dunkin Donuts

Part Two:

PArt Two:
4.Price of Coffee beans increases because it is a very cold
day, like -10 degrees Fahrenheit, and people want coffee to
help warm themselves. The could also increase if there was a
forest fire that burnt down most of the coffee bean plants
so there is a very low supply. The price could decrease if
the temperature was hot, like a 100 degrees Fahrenheit,
because it is too hot to be drinking coffee.

Source For PArt Two:

- Babs

Part 3:
1. Future:
a.
b.

Legally binding agreements, made on trading floor of a future

exchange, to buy or sell something in the future
An agreement to buy or sell a commodity in the future.

Part 3:
2. Chicago Mercantile Exchange
- The CME groups was made after World War I. It allowed the
public to participate in commodity trading. the first
official day of trading was December 1st. The group was a
hit with the public and began to become popular. Then the
group began to expand and include more and more
commodities.
- The CME group trades with the CME, CBOT, NYMEX, and COMEX
groups.
- The CME group traded a total of three cars the first day
it was open.

part 3:
3. Contract Specifications
- Quantity= 37,500 pounds
- Contract months= March, May, July, September, and
December
- Place of delivery= exchanged licensed warehouses in the
port of new york district, the port of new orleans, the
port of houston,the port of miami, and the port of
Barcelona.
- How prices are quoted= $/pound
- Minimum price fluctuation= $0.0005 per pound

PArt 3:
4.

Hedgers VS Speculators

Hedgers investment to reduce risk in adverse price

fluctuations (by contracts set at a fixed prices).
Speculators buy and sell future contracts expecting to make
a profit based in their interpretations of future price
changes.
Coffee Bean Hedgers- producers: Starbucks, Kraft

PArt 3:
5.ICE and NYMEX
- ICE
-

Cotton
Gold

- NYMEX
-

Cocoa
Fuel

Part 3:
6.

Futures Market VS Stock Market

Trade Futures
Such as
agricultural,
financial, and
equity index
products

Trade Stocks

Centralized
Markets

Such as IBM and

General motors stocks

Part 3 Sources:
- http://www.cmegroup.com/company/history/
- http://www.farmdoc.illinois.
edu/irwin/archive/books/Futrs_Tradng_in_Livestck/Futures_
Trading_in_%20Livestock_Part%20I_2.pdf
- BABS
- https://www.theice.com/products/15/Coffee-C-Futures

Part 4:
1. The spreadsheet with daily openings, highs, lows, and
statement prices can be found by clicking the provided
https://docs.google.
com/spreadsheets/d/1qZEsGZ2BvZTkrF4NT2aUP1WMAgSHTjLcSRv7b
GkBBLk/edit#gid=0

Part 4:
2. The contract month I followed was March.

PArt 4:

Part 4:
Here is a link to my Daily Diary.
https://docs.google.com/document/d/1IevZx6ZMvQhBFpn3l8DB4m35cdx8fyzAXpjF62-lss/edit

Part 4:
Here is the link to my trading positions.
https://docs.google.com/document/d/14XGQqjvNt-o_f4kxa0N4uD9cfjYQIDVmHYIpranUIw/edit

Part 4:
Here is the link to my summary.
https://docs.google.com/document/d/1jUoaBvx2Ndv_OlBDNYuHgxi0orpWnPV1MaHRznpnvI/edit

Sources:
http://dailycoffeenews.com/2016/01/06/el-salvadors-coffeeindustry-at-a-crossroads/
http://www.gettyimages.com/detail/news-photo/sign-for-acoffee-shop-stands-on-january-8-2016-at-an-air-newsphoto/504024500
http://westhawaiitoday.com/news/local-news/coffee-berryborer-found-oahu
http://www.bizjournals.com/pacific/news/2016/01/15/coloradolandowner-gives-hawaii-coffee-farmers.html
http://www.crs.org/media-center/crs-news/climate-changethreatens-central-american-coffee-cocoa-boom-bo

Sources continued:
http://www.ipsnews.net/2015/12/climate-smart-coffee-andbanana-set-to-boost-east-african-farmers-income/
http://www.reuters.com/article/us-brazil-farming-weatheridUSKCN0V62SS
http://www.chron.com/business/article/Drought-more-coffeefans-could-limit-global-6788434.php
http://www.bloomberg.com/news/articles/2016-01-31/witheringcoffee-crop-spurs-investors-to-trim-bets-on-price-fall