Soft commodity

One half of an old market division. Softs are grown, so supply arrives on a harvest cycle from a small number of producing regions and cannot be increased quickly whatever the price does. Hards are extracted, and while extraction is also slow to change, it is not tied to a season or to weather in the same way. The division is a market habit rather than an official classification, and the boundary is drawn slightly differently by different exchanges and indices.

Prices are driven by the specific supply chain rather than by broad economics. Weather in the origin region, the stocks held against annual consumption, planting decisions taken a season earlier, export taxes, quotas and shipping all matter, as does the currency of the producing country, since a weaker producer currency raises the incentive to export. Seasonality is real in these markets, but it is a tendency observed across many years, not a schedule.

The instrument is where the trip is. What is quoted is a specific futures contract on a specific grade, delivery month and delivery point, so the price of coffee is really the price of one contract among several. A continuous chart is built by rolling from one delivery month to the next, and because the curve can be in contango or backwardation, that chart is not a record of what the commodity itself did. Units differ by market as well, cents per pound in one and dollars per bushel in another, which is why the stated tick value of a contract carries more information about exposure than its headline price.