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Understanding Differentials and the NY Market

Posted Oct 23, 2023 in Resources for Roasters

Coffee differentials, or ‘basis’ as it is called in most other commodity markets, are an important feature of coffee trading. In a typical commercial coffee contract, a buyer of coffee has a short futures contract fixation to counteract the risk of underlying coffee contract prices falling, but the differential (“diff”, for short) itself is never protected. In our last article, we covered what a differential is and how it impacts the price of coffee. In this article, we aim to explain some of the most referenced differential categories in Arabica and explore their relationship with the NY market and internal production dynamics. We’ll cover the three main types of differentials and explore how the data show us that there is significant variation in the relationship between differentials and the C market both from region to region and even from year to year.

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