Coffee has a significant impact on the economies of over forty producing countries. In value it is second only to oil in terms of international trade and surpasses sugar, rice and wheat as the major agricultural commodity. Over twenty million people are employed in growing, distributing and retailing coffee world-wide.

There are two main types of coffee:

Robusta: is grown at altitudes usually up to 800 meters. Indonesia, West Africa, Brazil and Vietnam are the most dominant growing areas. Robusta currently represents around 30% of world production.

Arabica: is grown at altitudes between 600 and 2000 meters. Latin America and East Africa are the most dominant growing areas. Arabica currently represents around 70% of world production.

It takes approximately four years for a coffee bush to produce a useful crop. The first sign of the size and health of the crop is the white flowers which appear along the branches. The fruit or "cherry" (named because of its resemblance, not its flavour) is green at first, but changes to yellow and finally to red when it ripens.

The cherry should only be picked when red, the work is extremely labour intensive. Coffee cherries do not ripen simultaneously even when they are on the same branch so mechanical picking is not a particularly viable option, although it is used in some areas. Coffee bushes are kept at a manageable height of around six feet for harvesting purposes. In the wild they can grow much higher.

Depending on the country of origin and the quality of bean, coffee is usually processed in one of two ways:

"Dry Processing": this process involves spreading the cherries out on the ground to dry in the sun for two or three weeks. The cherries are then fed into machines which remove the outer husk. The green bean is now ready to be cleaned and sorted.

"Wet Processing": this process involves soaking or "fermenting" the ripe cherries in tanks until the outer layer is ready to be moved. This layer, called pulp or "mucilage" is then removed by machine. The bean is then left encased in a dry brittle covering known as "pergamino" or "parchment". The coffee can be left in this state for some time, or the parchment can be removed in order to sort the coffee into grades.

Of the two methods "Wet Processing" is usually considered to produce higher quality coffee but at the same time is more expensive

Euronext.liffe's Robusta Coffee Futures contract was originally launched in 1958 and is used globally as the benchmark pricing mechanism for Robusta Coffee.

It was the major coffee price rises of the 1970s that caused use of the contract to rise substantially as more and more businesses within the industry realised the benefits of using futures as a risk management tool. Since this time, the use of coffee futures and options as a hedging medium has become an almost integral part of the international industry by allowing all of those involved to minimise the losses associated with unfavourable price movement. Futures and options volumes currently equate to approximately 5 times the global production of Robusta Coffee.

Coffee futures & options have been traded on LIFFE CONNECT® since 27 November 2000.

The main contract users are coffee exporters, international trade houses, European and U.S. coffee roasters, managed futures funds, institutional investors and options specialists.

The long term support of the underlying coffee trade and industry has ensured that Robusta Coffee futures have retained their role as the premier price fixing medium for physical coffee contracts. Complementing this, the contract's close relationship to the physical market place, coupled with high levels of market liquidity, have continued to attract an ever-increasing level of business from the international investment fund community.

For further information please contact coffee@liffe.com