Soft Futures and Options Trading

ICE Soft Futures and Options Markets

The soft markets cover many of the food and fiber commodities. They are often considered exotic as many of these commodities are predominately grown in other regions of the world.

  • Cotton Futures
  • Cocoa Futures
  • Coffee Futures
  • Sugar Futures
  • Lumber Futures
  • Orange Juice Futures

Cotton Futures:

Cotton is a natural fiber used mainly in clothing and home furnishings. Cotton is normally bought by textile mills, which manufacture the cotton into clothes, towels, sheets, etc.

Seasonally, the highest prices for cotton futures normally occur between March and July. The lowest prices typically occur between September and November.

Texas is the largest producing state for cotton, followed by Arkansas, Georgia and Mississippi.

China is the largest producing country for cotton, followed by the US, India and Pakistan.

Cocoa Futures:

The cocoa tree needs a hot and rainy climate (tropical rain forest) in order to thrive and is generally confined to areas not more than 20 degrees north or south of the equator.

The cocoa tree takes about five years after planting to produce cocoa beans and about ten years to achieve maximum production.

Cocoa trees produce pods. Each pod produces from 20 to 50 beans (approximately 400 beans are required to make one pound of chocolate).

Most cocoa is harvested between October and January.

Coffee Futures:

A coffee tree will yield an amount of coffee beans to fill a one-pound can of ground coffee during each growing season.

It takes 3 to 5 years after planting a coffee tree before it can produce marketable coffee beans.

The world's largest producers of coffee are Brazil, Vietnam, Columbia and Indonesia.

Brazil and Columbia mainly produce Arabica coffee. Vietnam produces Robusta coffee, which is considered to be lower quality than Arabica.

Arabica is the type of coffee traded at ICE Futures US (ICE).

The world typically produces about 120 million, 60 kilo bags of coffee per year.

Sugar Futures:

Sugar is produced from sugarcane and sugar beets. Both produce the identical refined sugar product. Sugarcane accounts for about 70% of world sugar production.

The largest sugarcane producing countries are Brazil, India, China, and Thailand; respectively. The largest producing states are Florida, Louisiana, Texas and Hawaii.

The largest producing regions of sugar beets are Europe, U.S., China and Japan. The largest producing states of sugar beets are Minnesota, Idaho, North Dakota and Michigan.

Nearly 80 percent of world import demand comes from developing countries.

Around 70 percent of worldwide sugar production is consumed in the country that produced it.

Brazil is both the largest exporter of sugar and the largest producer and user of ethanol.

Orange Juice:

The process for making FCOJ was invented in Florida in 1947.

The contract for orange juice futures is for frozen concentrated orange juice (FCOJ), since the contract is deliverable and oranges (juice) are perishable.

Most of the FCOJ produced in the US is consumed domestically.

Most of the oranges produced in Florida are used for juice, while most of the oranges produced in California are used for eating.