Trade credit terminology and definitions

Physical coffee - green coffee.

First hand - coffee sold from/by origin.

Second hand - coffee subsequently sold on by overseas traders.

Long - coffee bought in expectation of later sale.

Short - coffee sold against expected future purchases or arrivals.

Spot - immediately available coffee.

Forward sales - coffee sold for later shipment, sometimes months ahead.

Futures market - trades standard qualities and quantities of coffee for future delivery at pre-determined ports during specific months or trading positions.

Paper trade or paper coffee - trade in futures and other contracts that are offset against each other, i.e. do not result in physical delivery of coffee.

Differential - premium or discount of 'our coffee' with respect to futures market.

Outright sale or fixed price sale - the full selling price is set at the time of sale.

PTBF - price to be fixed: selling now at a known differential against the futures market with the futures price being determined later.

Fixing - the action to determine the futures price that, combined with the differential, will become the contract price for the physical coffee.

PTBF seller's call - futures price to be called or fixed by the seller.

PTBF buyer's call - futures price to be called or fixed by the buyer.

Price risk - the risk that the coffee price generally moves against us.

Basis risk or differential risk - the risk that the differential moves against us.

Collateral - underlying security for advances, for example stocks.