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The market looks to be in a good position to continue to trend higher and test the December highs soon. Declining exchange stocks and a tightening cash situation in Colombia and Brazil should help provide underlying support.
While there is some uncertainty on the longer-term fundamentals for the coffee market, the short-term signals from the cash market and the short-term technical signals look supportive. Exchange stocks are in a downtrend and cash premiums remain high. Owners of exchange stocks do not seem motivated to sell with cash premiums high from many key locations. However, buyers seem a little more interested in owning exchange stocks with Colombia coffee spot markets trading 60 cents premium to New York futures and Honduras coffee trading at a 14 cent premium to the board. The bullish action in the cash market is seen as a positive short-term force. Colombia cash premiums are up 8 cents from just prior to Christmas. The market closed moderately lower on the session yesterday after the early rally to the highest level since December 21st failed to attract new buying interest and speculative long liquidation selling was noted into the close. The failure of coffee and other commodity markets to find much support from the much weaker US dollar and sharply higher gold prices helped spark more aggressive selling from speculators to help pressure. Some speculation that coffee areas of Mexico could have been hit with cold enough weather on the weekend to spark some damage helped support the rally on Friday and traders will be monitoring the crop this week to see if damage actually occurred. Brazil exported 2.25 million bags of coffee in December, down from 2.99 million bags in Dec 2008. For all of 2009, Brazil exported 27.34 million bags which is up from 26.03 the previous year. For 2010, the Council of Green Coffee Exporters believes exports will be near 27.3-27.8 million bags. The International Coffee Organization indicated yesterday that world consumption in 2009 increased to near 132 million bags from 130 million in 2008 which suggests that the economy does not have much of a negative impact on consumer demand for coffee. Daily ICE certified deliverable coffee stocks were down 5,932 bags to 3.073 million with 7,387 bags pending review.
TODAY’S GUIDANCE: Buying support for March coffee comes in at 142.65 and 141.10 with 147.60 and 154.70 as next upside objectives.
TODAY’S MARKET IDEAS: Consider buying breaks.
Coffee Market Commentary – 2010.01.12
by Terry Roggensack on January 12, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
The market looks to be in a good position to continue to trend higher and test the December highs soon. Declining exchange stocks and a tightening cash situation in Colombia and Brazil should help provide underlying support.
While there is some uncertainty on the longer-term fundamentals for the coffee market, the short-term signals from the cash market and the short-term technical signals look supportive. Exchange stocks are in a downtrend and cash premiums remain high. Owners of exchange stocks do not seem motivated to sell with cash premiums high from many key locations. However, buyers seem a little more interested in owning exchange stocks with Colombia coffee spot markets trading 60 cents premium to New York futures and Honduras coffee trading at a 14 cent premium to the board. The bullish action in the cash market is seen as a positive short-term force. Colombia cash premiums are up 8 cents from just prior to Christmas. The market closed moderately lower on the session yesterday after the early rally to the highest level since December 21st failed to attract new buying interest and speculative long liquidation selling was noted into the close. The failure of coffee and other commodity markets to find much support from the much weaker US dollar and sharply higher gold prices helped spark more aggressive selling from speculators to help pressure. Some speculation that coffee areas of Mexico could have been hit with cold enough weather on the weekend to spark some damage helped support the rally on Friday and traders will be monitoring the crop this week to see if damage actually occurred. Brazil exported 2.25 million bags of coffee in December, down from 2.99 million bags in Dec 2008. For all of 2009, Brazil exported 27.34 million bags which is up from 26.03 the previous year. For 2010, the Council of Green Coffee Exporters believes exports will be near 27.3-27.8 million bags. The International Coffee Organization indicated yesterday that world consumption in 2009 increased to near 132 million bags from 130 million in 2008 which suggests that the economy does not have much of a negative impact on consumer demand for coffee. Daily ICE certified deliverable coffee stocks were down 5,932 bags to 3.073 million with 7,387 bags pending review.
TODAY’S GUIDANCE: Buying support for March coffee comes in at 142.65 and 141.10 with 147.60 and 154.70 as next upside objectives.
TODAY’S MARKET IDEAS: Consider buying breaks.
Tags: Coffee, Softs
About Terry Roggensack