Purchasing Coffee as a Commodi

Introduction Coffee is a refreshment beverage that is produced in many places throughout the world. Coffee is the second most important traded (legal) commodity in the world next to oil (Trouble Brewing 1). Coffee is considered a commodity, that is widely traded on several worldwide exchanges, most notably the New York Board of Trade (NYBOT). A future market for coffee exists in order for buyers to reduce risk as well as for speculators to attempt to …

…have to rise to $.702 cents/lb, which was found by using breakeven analysis. Based on the standard deviation of .29 cents/lb from the past three years of cash price data, the probability of coffee rising to $.702 appears to be great in April. However, we are very confident with our forecast and are going to stay with option number two. We strongly believe that the price of coffee will fall, not rise.