Coffee futures and price discovery in Latin America
The International Coffee Organisation (ICO), in collaboration with the Department of Agricultural Economics and Rural Development at Georg-August University of Goettingen, Germany, conducted a study on the role of futures markets for price discovery in Latin American markets whose results were recently published.
It analyses the relationship between the spot and futures market for coffee in Brazil, Colombia, Guatemala, Honduras, the Dominican Republic and El Salvador. The study focused on investigating the relationship between spot market and futures prices for coffee, and analyzing the role of futures markets as a price discovery mechanism using ICO price data from six coffee producing countries in Latin
America, namely Brazil, Colombia, Guatemala, Honduras, El Salvador and the Dominican Republic.
The role of futures markets is to provide an instrument for market participants to hedge their price risk. Futures prices reflect the combined views of a large number of buyers and sellers expressing their expectations of the future value of a certain commodity. Click below to read the findings of the study which analyses the relationship between coffee futures and product prices in Latin America and how futures market provide a price discovery vehicle.