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Soft Commodity Futures SOFT COMMODITY FUTURES

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Soft Commodity Futures SOFT COMMODITY FUTURES Introduction to Soft Commodity Futures SOFT COMMODITY FUTURES FROM YOUR MORNING COFFEE AND DANISH TO YOUR HOT CHOCOLATE BY THE FIRE, SOFT COMMODITY PRODUCTS ARE A MAJOR COMPONENT OF EVERYDAY LIFE. By understanding the fundamentals of the soft commodity product futures, traders and end-users can leverage better methods of price discovery and risk management. Coffee Futures Cocoa Futures Sugar Futures An investment in futures contracts involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits. You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources, and other relevant 01 Rosenthal Collins Group, LLC circumstances. Past performance is not necessarily indicative of future results. COFFEE FUTURES Coffee: An Overview Millions of people all over the globe begin each and every day with coffee. This commodity is now cultivated in over 70 countries and is a major export commodity. Types of Coffee: • Arabica: This type of coffee was originally indigenous to Ethiopia. Arabica is sometimes referred to as mountain coffee and represents the bulk of global coffee production. • Robusta: This type of coffee has its roots in sub-Saharan Africa and it is often used in espresso and instant coffee blends. Robusta contains greater quantities of caffeine as well as higher antioxidant levels compared to Arabica. Coffee Use Although when you think of coffee you likely think of drinking it, there are numerous other potential uses for coffee including: • Coffee personal care products • Insect repellant • Fertilizer • Flavoring Investing in Coffee As a major global commodity, there are numerous ways to invest in coffee. For exposure to today’s coffee markets, you can use multiple vehicles including equities, ETFs and futures. 02 Rosenthal Collins Group, LLC COFFEE FUTURES General Factors Influencing Price Although the price of coffee may fluctuate with other soft commodities, the market has its own unique set of supply and demand factors that can influence price movement. The coffee market can be affected by numerous factors both from a local standpoint as well as a global standpoint. Some of these key issues include: • General economic conditions • Currency market fluctuations • Weather conditions • Global demand • Government and import/export regulations SOURCE: https://en.wikipedia.org/wiki/Coffee Other Factors Influencing Price Looking at the coffee market as a whole, it is important to keep in mind that while there are numerous issues potentially impacting prices (like those listed above), there are also other costs that can affect prices for end-users. Some of these other possible costs include: • Transportation costs • Insurance costs • Cropstorage and interest costs • Inventory levels Coffee Jolt Expectations for a poor Brazilian harvest have sent coffee prices to two-year highs amid steadily rising demand. Brazilian coffee production Arabica-futures prices Global demand illion as $3.00 a pound 6 million metric tons illion as Monday: illion $2.202 50 2.50 5 40 2.00 4 30 1.50 3 20 1.00 2 10 0.50 1 0 0 0 2009 ‘10 ‘11 ‘12 ‘13 ‘14 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 2009 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 Notes: One bag weighs 60 kilograms, futures prices as of midday Monday *Projections Sources: Conab (production); FactSet (continuous, most-active contracts); Euromonitor (demand) The Wall Street Journal SOURCE: https://seekingalpha.com/article/3021666-why-coffee-could-be-the-best-commodity-performer-of-2015 03 Rosenthal Collins Group, LLC COFFEE FUTURES The world’s biggest coffee drinkers Coffee consumption per capita etherlands 2.414 cups per day inland . Sweden . enmark . ermany . Slovakia . Serbia . Cech epublic . Poland . orway . Slovenia . Canada . Belgium . Switerland . ew ealand . SA . Austria . Costa ica . reece . Algeria . acedonia . rance . ithuania . Bosnia-Heregovina . Philippines . stonia . eorgia . Spain . ussia . omania . Brail . Belarus . Colombia . ominican epublic . Israel . SOURCE: http://www.forbes.com/sites/michaellingenheld/2015/02/03/coffees-weakness-masks-bullish-fundamentals/#511047c42e5c 04 Rosenthal Collins Group, LLC COFFEE FUTURES CME GROUP Contract Specifications Contract Unit 37,500 pounds Price Quotation U.S. Dollars per pound Trading Hours CME Globex: Sunday - Friday 6:00 p.m. - 5:00 p.m. (5:00 p.m. - 4:00 p.m. Chicago Time/CT) with a 60- minute break each day beginning at 5:00 p.m. (4:00 p.m. CT) CME ClearPort: Sunday - Friday 6:00 p.m. - 5:00 p.m. (5:00 p.m. - 4:00 p.m. Chicago Time/CT) with a 60- minute break each day beginning at 5:00 p.m. (4:00 p.m. CT) Minimum Price Fluctuation $0.0005 per pound Product Code CME Globex: KT CME ClearPort: KT Clearing: KT Listed Contracts Trading is conducted in the March, May, July, September, and December cycle for the next 23 months. Settlement Method Financially Settled Termination Of Trading Trading terminates on the day immediately preceding the first notice day of the corresponding trading month of Coffee “C” futures at ICE Futures U.S. Settlement Procedures Nymex Coffee Settlement Procedures Position Limits NYMEX Position Limits Exchange Rulebook NYMEX 931 Block Minimum Block Minimum Thresholds Price Limit or Circuit Price Limits Vendor Codes Quote Vendor Symbols Listing Source: CME Group: http://www.cmegroup.com/trading/agricultural/softs/coffee_contract_specifications.html as of 5/25/17 An investment in futures contracts involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits. You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources, and other relevant 05 Rosenthal Collins Group, LLC circumstances. Past performance is not necessarily indicative of future results. COCOA FUTURES Cocoa: An Overview Many of the world’s tastiest treats, holiday candies and desserts are derived from or contain cocoa. Although cocoa can be enjoyed in many different forms, it also has an equally rich history. The cacao tree originated in Central America as well as in parts of Mexico. Cacao trees only grow in very specific geographic regions, and today almost 70 percent of the global cocoa crop comes from West Africa. Just as cocoa was an important commodity in the past, it is a vital component today in countless foods, beverages and other products. Cocoa Use Cocoa is widely used in the production of food and beverages, and is a major component of many types of candy and chocolate. The possible uses for cocoa don’t stop there, however. This commodity can also be used for: • Production of cocoa butter • Animal feed • Potash • Jams and marmalades • Mulch Investing in Cocoa As a global commodity, the cocoa market may attract not only those needing to hedge but speculators as well. There are numerous ways to gain exposure to the cocoa market. Cocoa investments can potentially be made using cocoa producer stocks, cocoa-based ETFs or futures and options contracts. 06 Rosenthal Collins Group, LLC COCOA FUTURES General Factors Influencing Price The cocoa market can be driven by numerous factors, including but not limited to: • General economic conditions • Seasonality • International politics • Weather • Supply and demand Other Factors Influencing Price • Harvesting costs • Transportation • Insurance • Storage • Emerging market demand Summary of revised estimates Cocoa year 2014/2015 2015/2016 Year-on-year change (Oct-Sep) Revised Previous Revised estimates estimates a/ estimates (thousand tonnes) (per cent) World production 4 248 3 988 4 031 - 217 - 5.1% World grindings 4 154 4 160 4 141 - 13 - 0.3% Surplus/deficitb/ 52 - 212 - 150 End-of-season stocks 1 597 1 376 1 447 - 150 - 9.4% Stocks/Grindings ratio 38.4% 33.1% 34.9% Notes: a/ Estimates published in Quarterly Bulletin of Cocoa Statistics, Vol. XLII - No. 3 - Cocoa year 2015/2016 b/ Surplus/deficit: net world crop (gross crop adjusted for loss in weight) minus grindings Totals may differ due to rounding.. SOURCE: https://www.icco.org/about-us/icco-news/333-quarterly-bulletin-of-cocoa-statistics-november-2016.html 07 Rosenthal Collins Group, LLC COCOA FUTURES CME GROUP Contract Specifications Contract Unit 10 metric tons Price Quotation U.S. Dollars per ton Trading Hours CME Globex: Sunday - Friday 6:00 p.m. - 5:00 p.m. (5:00 p.m. - 4:00 p.m. Chicago Time/CT) with a 60- minute break each day beginning at 5:00 p.m. (4:00 p.m. CT) CME ClearPort: Sunday - Friday 6:00 p.m. - 5:00 p.m. (5:00 p.m. - 4:00 p.m. Chicago Time/CT) with a 60- minute break each day beginning at 5:00 p.m. (4:00 p.m. CT) Minimum Price Fluctuation $1.00 per ton Product Code CME Globex: CJ CME ClearPort: CJ Clearing: CJ Listed Contracts Trading is conducted in the March, May, July, September, and December cycle for the next 23 months. Settlement Method Financially Settled Termination Of Trading Trading terminates on the day immediately preceding the first notice day of the corresponding trading month of Cocoa futures at ICE Futures U.S. Settlement Procedures Nymex Cocoa Settlement Procedures Position Limits NYMEX Position Limits Exchange Rulebook NYMEX 930 Block Minimum Block Minimum Thresholds Price Limit or Circuit Price Limits Vendor Codes Quote Vendor Symbols Listing SOURCE: http://www.cmegroup.com/trading/agricultural/softs/cocoa_contract_specifications.html as of 5/25/17 An investment in futures contracts involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits. You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources, and other relevant 08 Rosenthal Collins Group, LLC circumstances.
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