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Ag Futures: Key Parameters and Drivers (Part 1)

Ag Futures: Key Parameters and Drivers (Part 1)

Author: Doug Christie

This is part 1 of a deep dive into the trading parameters and market drivers of different ag commodities, covering the following:

  • Palm Oil
  • Sunflower Seed
  • Canola
  • Coffee
  • Cocoa
  • Orange Juice

Palm Oil

Palm oil is the most widely produced and widely traded edible oil in the world. Palm oil is produced from the fruit of oil palm trees. Once planted, the trees have a productive life of around 30 years. The tree will produce fruit each month with seasonal variation. The fruit is processed to make crude palm oil. The crude palm oil can be refined or fractionated into a liquid oil component (olein) and a vegetable fat component (stearin) with both products needing to be further refined before human consumption. The seed inside the fruit is known as a palm kernel and it too can be processed to produce palm kernel oil. 

1) Key Trading Parameters

  • Exchange Traded: Chicago Mercantile Exchange (CME) (as a derivative of the Kuala Lumpur Commodity Exchange contract.)
  • Price Quote: US dollars per metric ton
  • Futures Contract size: 25 metric tons
  • Contract Months: Jan-Dec
  • Settlement: Cash Settlement

2) Market Drivers

Global Supply and Demand Dynamics: Over 80% of the world’s palm oil supply is produced in Malaysia and Indonesia. India, Pakistan, China and the EU are the largest consumers of palm oil. Production has a strong seasonality with the largest harvests occurring in Sep-Oct and the lowest period in Jan-Feb.  

Multiple Uses: Refined palm oil and palm olein are used predominantly as a frying oil and both are featured widely in diets in the Indian sub-continent and China. Palm stearin has a higher melting point and is used as a fat in edible applications (baking, shortening, cocoa butter substitute) and in inedible applications (soap, cosmetics) and as an animal feed. Palm kernel oil is high in lauric acid and is used primarily for industrial applications as an oleochemical. 

Widely Traded: Palm oil is the most actively shipped and traded vegetable oil in the world, accounting for more than half of the global trade of all vegetable oils. Palm oil is the number one oil import for the world’s two largest oil consumers – China and India. 

Health Issues: Palm oil is naturally higher in saturated fat than oilseed oils and thus has negatively impacted demand in some markets. Offsetting this, palm oil is naturally lower in trans-fat and it has gained in other markets as a result.

Sustainability Issues: As a tropical plantation crop, palm oil production has historically been associated with concerns about de-forestation. Over the past decade, palm oil producers and consumers have implemented increasingly stringent requirements for production codified under the auspices of the Roundtable for Sustainable Palm Oil (RSPO). 

Sunflower Seed

Sunflower seed is one of the five major global oilseeds and is the source for sunflower oil. Although some sunflower seed is grown for consumption as food directly, most seed is harvested and processed into sunflower oil and sunflower meal. There are multiple varieties of sunflower seed, differentiated by oleic acid profile.  

1) Key Trading Parameters:

  • Exchange Traded: No. 

2) Market Drivers

Global Supply and Demand Dynamics: Sunflower seed production is concentrated in Russia, Ukraine and the European Union, with smaller contributions from Argentina and the US. Sunflower oil is a lightly traded oil with most consumption taking place in the region where it is produced. 

Oleic Oil Profile: Sunflower seed can be produced in different varieties with unique fatty acid profiles. Traditional, mid-oleic and high oleic varieties allow sunflower oil to be used across different food applications.  

Yield lag: Production yield per acre has been relatively flat for sunflower seed while yield for competing crops have risen. For this reason, sunflower oil has remained a ‘niche’ oil accounting for a relatively small share of global vegetable oil production. 


Canola (also known as rapeseed) is a major oilseed, second only to soybean in production volume. With 40% oil content, it can be physically pressed to produce oil with residual oil extracted using solvent. Canola meal serves as an animal feed but with lesser value than soybean meal due to lower protein and higher fiber content.

1) Key Trading Parameters

  • Exchange Traded: Intercontinental Exchange (ICE), ICE Futures US
  • Price Quote: Canadian dollars per metric ton
  • Futures Contact size: 20 metric tons
  • Contract Months: Jan March, May, Jul, Dec
  • Settlement: Physical Delivery

2) Market Drivers:

Supply and Demand Dynamics: Canada is the largest single producer of canola, with the European Union collectively producing similar volumes. Other major producers include China and India. Canada is the largest exporter with China being the largest importer.

Oil-driven demand: With its higher oil content and less desirable meal component, canola is less tied to livestock production. Canola meal is a by-product of processing to meet oil demand. The rising demand for biofuels over the past 20 years has supported growth in canola production the majority of that coming in North American and Europe. 

Specialty varieties: As with sunflower, canola is produced with a variety of fatty acid profiles. This spectrum of production allows canola to be used in specialty food application as in exclusively industrial application for some varieties of non-edible rapeseed. 


Consumed as a morning starter, an afternoon pick-me-up or just as a premise to meet friends, coffee is one of the most widely consumed beverages in the world. Coffee is one of the most ‘visible’ commodities to consumers with lifestyle decisions and global brands built around its consumption. Coffee is sourced from the coffee plant which produces fruit that is harvested to procure coffee beans. The beans are then dried, roasted, ground, and then brewed into coffee beverages. There are two principal varieties of coffee bean, arabica and robusta. Coffee plants grow in a narrow latitude around the equator. Global trade in coffee is primarily green, unroasted beans.  

1) Key Trading Parameters:

  • Exchange Traded: Arabica - Intercontinental Exchange (ICE), ICE Futures US
  • Exchange Traded: Robusta - Intercontinental Exchange (ICE), ICE Europe 
  • Price Quote: Arabica - US cents per pound
  • Price Quote: Robusta – US dollars per metric ton
  • Futures Contact size: Arabica - 37,500 pounds 
  • Futures Contract size: Robusta – 10 metric tons
  • Contract Months: Arabica - March, May, Jul, Sep, Dec
  • Contract Months: Robusta – Jan, March, May, July, Sep, Nov
  • Settlement: Physical Delivery

2) Market Drivers 

Global Supply and Demand Dynamics:Brazil, Vietnam, Colombia, and Indonesia are the leading growers of coffee. Central American and African nations also contribute to global coffee production. Over 80% of global cotton production is shipped cross-border. The European Union, US and Japan are the leading importers of coffee. 

Quality Differentials: Arabica and Robusta are the first distinctions in coffee bean quality. Arabica is generally a higher- valued and more consistent bean. Robusta has a wider variability of quality with both premium and discounted varieties.  Both types are graded after roasting, and sometimes brewing, across a wider range of parameters including color and aroma.  

Demand profile: Coffee is a consumer-driven demand base. Unlike many other commodities which are fungible, coffee users often know the origin and variety of beans and ascribe taste and value perceptions based on that information.  

Fair Trade and Sustainability: Although produced on an industrial scale, coffee cultivation is often associated with small-holder farmers. Consumer and activist concerns for the well-being of growers gave rise to “fair trade” labeling which promoted greater transparency around the economic, and more recently, agronomic practices of coffee production.  


Introduction: Cocoa is known globally as the primary ingredient for chocolate production. The cacao tree produces fruit pods which are harvested and opened to collect the cocoa bean. The beans are then further processed into cocoa powder or cocoa butter, both of which are used in the production of chocolate and other confectionary items. Cocoa occupies a unique place in the agricultural commodity world due to its high value and relatively small production volume.  

1) Key Trading Parameters:

Exchange Traded: Intercontinental Exchange (ICE), ICE Futures US

Price Quote: US dollars per metric ton

Futures Contact size: 10 metric tons

Contract Months: March, May, Jul, Sep, Dec

Settlement: Physical Delivery

Exchange Traded: Intercontinental Exchange (ICE), ICE Europe 

Price Quote: British pounds per metric ton

Futures Contract size: 10 metric tons

Contract Months: March, May, July, Sep, Dec

Settlement: Physical Delivery

2) Market Drivers: 

Global Supply and Demand Dynamics: Cote d’Ivoire and Ghana are the two leading producers of cocoa. The balance of production comes from other African nations, Brazil, Ecuador, and Central America and Indonesia. At roughly 5 million metric tons, cocoa production is small in comparison to other widely traded commodities.  

Diverse Trade: Harvesting and primary processing of cacao is typically done at origin while bean processing is concentrated in Europe and the US. Cocoa products are shipped internationally to supply both domestic and global chocolate and confection brand sales.  

Labor practices: Cocoa is dependent on manual labor for harvesting and primary processing with much of the activity occurring on a small scale. Additionally, the major producing regions are areas with limited economic development and opportunity. As such, the industry has been a focus area for humanitarian groups seeking to prevent the use of child labor and improve overall labor conditions. The issue remains an active one for both NGOs and industry participants. 

Sustainability Issues: As with other tropical commodities, efforts are being made to implement and document sustainable agronomic practices. The diverse and fragmented supply chain between grower and consumer has to some extent limited the impact and visibility of these efforts, though the percentage of certified sustainable production is increasing. 

Orange Juice

Orange juice, a breakfast staple for many, is not just a morning beverage but a significant player in the commodities market. Oranges are a tree crop. Once planted, an orange grove will produce fruit on a seasonal cycle for multiple years. The harvested fruit is processed into orange juice solid and typically frozen and concentrated for shipping and trading purposes. In this article, we will delve into the key drivers shaping the prices of orange juice and explore what sets it apart from other commodities.

1) Key Trading Parameters

  • Exchange Traded: Intercontinental Exchange (ICE), ICE Futures US
  • Price Quote: US cents per pound
  • Futures Contract size: 15,000 pounds 
  • Contract Months: Jan, March, May, Jul, Sep, Nov
  • Settlement: Physical Delivery

2) Market Drivers

Global Supply and Demand Dynamics: Orange juice production is concentrated in a few countries, with Brazil, Mexico, and the United States being the major producers. Brazil dominates the global market, accounting for nearly 60% of production. The United States and the European Union are the primary consumers of orange juice. Brazil also holds a dominant position in exports, with over 70% of global FCOJ exports originating from the country. 

Weather Conditions and Crop Health: The production of oranges is highly sensitive to weather. Frost, hurricanes, and other adverse weather events can impact citrus crops, affecting both quality and quantity. Crop disease and pests also contribute to supply uncertainties, directly influencing orange juice prices. Because production is concentrated in a few regions, negative events can have strong market impact. 

Citrus Production Cycles: Orange trees follow a seasonal production cycle, resulting in periodic fluctuations in the availability of oranges for juice production. Understanding and anticipating these cycles is crucial for market participants, as variations in supply throughout the year can impact prices. Growers can also influence these cycles with their growing, harvesting and processing practices. 

Nutritional and Lifestyle Appeal: While some commodities are driven primarily by industrial or manufacturing demand, orange juice has a strong consumer-facing aspect, with marketing and consumer perceptions playing a significant role in shaping its market dynamics. Changes in consumer attitudes towards health and nutrition, as well as shifts in beverage preferences, can impact demand.  

Scale of Production: Orange juice producers tend to be large firms or organized as cooperatives of many growers. Unlike many crops where individuals make planting and marketing decisions, orange juice has a more industrial approach. It is less frequently traded than many other ag commodity futures markets.