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Financial market uncertainty seems to be growing and this is not a good set-up for the coffee market. Brazil is expected to be harvesting a bumper crop in the next few months with most traders looking for 51-55 million bags and some estimates pushing 60 million bags as compared with the official Brazil forecast near 47 million bags. There is some short-term tightness due to a lack of high quality coffee in Brazil and Colombia but this tightness is expected to ease soon and the new crop will saturate any short-term demand. The surge higher in the US dollar should serve to push potential buyers to the sidelines and encourages longs to exit. July coffee was able to overcome a stronger Dollar to post a small gain for the session yesterday with an inside trading session. Big trade estimates for the Brazilian harvest continue to dampen sentiment for the market, particularly as those estimates are running well above government forecasts. Although the crop will be harvested over the next few months, the Brazilian crop will begin the period in which it is most susceptible to frost. The short-term forecast, however, remains bearish with warmer and dry weather just ahead which is ideal for harvest. The COT report from Friday showed the combined spec trader held a net long position of 9,171 contracts (large and small combined) which was down 3,388 contracts in just one week. The long liquidation trend is seen as a short-term negative force. The USDA attache in Vietnam believes the 2010/11 crop will be up 7% this year to 18.73 million bags from 17.5 million last year and 18 million the previous season. ICE certified coffee stocks for the day were down by 1,050 bags to 2.352 million with 0 bags pending review.
TODAY’S GUIDANCE: Without help from the weather, the coffee market looks poised for another leg down. Outside markets are negative and this could spark more speculative long liquidation selling.
Coffee Market Commentary – 2010.05.25
by Terry Roggensack on May 25, 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!
Financial market uncertainty seems to be growing and this is not a good set-up for the coffee market. Brazil is expected to be harvesting a bumper crop in the next few months with most traders looking for 51-55 million bags and some estimates pushing 60 million bags as compared with the official Brazil forecast near 47 million bags. There is some short-term tightness due to a lack of high quality coffee in Brazil and Colombia but this tightness is expected to ease soon and the new crop will saturate any short-term demand. The surge higher in the US dollar should serve to push potential buyers to the sidelines and encourages longs to exit. July coffee was able to overcome a stronger Dollar to post a small gain for the session yesterday with an inside trading session. Big trade estimates for the Brazilian harvest continue to dampen sentiment for the market, particularly as those estimates are running well above government forecasts. Although the crop will be harvested over the next few months, the Brazilian crop will begin the period in which it is most susceptible to frost. The short-term forecast, however, remains bearish with warmer and dry weather just ahead which is ideal for harvest. The COT report from Friday showed the combined spec trader held a net long position of 9,171 contracts (large and small combined) which was down 3,388 contracts in just one week. The long liquidation trend is seen as a short-term negative force. The USDA attache in Vietnam believes the 2010/11 crop will be up 7% this year to 18.73 million bags from 17.5 million last year and 18 million the previous season. ICE certified coffee stocks for the day were down by 1,050 bags to 2.352 million with 0 bags pending review.
TODAY’S GUIDANCE: Without help from the weather, the coffee market looks poised for another leg down. Outside markets are negative and this could spark more speculative long liquidation selling.
Tags: Coffee, Softs
About Terry Roggensack