The Hightower Report

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The coffee market remains firmly entrenched within the recent trading range as prices have found little benefit this morning from a weaker Dollar and early strength in global equities. Improving macro-economic sentiment due to positive developments in the Euro zone has provided limited support for the coffee market but has not been enough for prices to shed their recent negative tone. Many European trade houses are projecting the upcoming Brazilian coffee crop at 55 to 58 million bags, which if accurate could potentially offset supply shortfalls from several major producers this season. With the Lunar New Year holidays concluding, coffee supplies from Vietnam may increase during the next few weeks. There are reports of an outbreak of the “roya” fungus in the Antigua coffee production region of Guatemala. ICE exchange coffee stocks were up 5,802 bags at 1.529 million as of January 26th, with 45,239 pending review.

TODAY’S GUIDANCE: The Dollar and global equity market may not be making strong enough moves for the coffee market to receive significant support this morning. With the shadow of Brazil’s potential “bin-buster” crop hanging over the market this far ahead of harvest, March coffee may need to receive fresh news of supply problems in order to break out above this week’s trading range.

TODAY’S MARKET IDEAS: March coffee resistance will be at 221.90 this morning, with 216.80 as the next support level. A slide below this week’s lows could lead to a retest of the mid-December lows.

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The coffee market has been in a tailspin during the latter part of this week, and prices have now completely given back the entire late August rally. December coffee kept sliding lower during yesterday, with prices reaching their lowest levels since late January. The market failed to find carryover support from a broad-based commodity rally, and a late rebound in the Dollar added to the negative tone. Forecasts for rain showers over Brazilian growing areas were a major factor in coffee’s plunge, as they should bring about the start of the critical flowering period and reinforce market ideas that Brazil’s upcoming coffee crop will match or exceed expectations. The start of the coffee harvest in Vietnam early next month should help to ease that nation’s tight near-term stocks situation. Trade officials in Colombia are still confident their nation will reach a production target of 9 million bags during 2011, in spite of poor weather earlier in the year. ICE exchange coffee stocks were up 1,004 bags to 1.432 million as of September 29th, with no bags pending review.

TODAY’S GUIDANCE: While the market is extremely oversold, the move under the September 23rd lows late yesterday left 224.80 as the next downside target. The bearish supply outlook for the coffee market has clearly overcome recently improving macroeconomic sentiment. The market could consolidate recent gains before it resumes its downtrend.

TODAY’S MARKET IDEAS: Initial resistance for December coffee comes in at 236.80 and 238.65. The steady to higher trend in open interest on the recent downtrend suggests that some fund traders are building up a hefty net short position, so we cannot rule out some increased volatility in both directions just ahead.

Below is a sample of The Hightower Report’s 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 longer term rally in the coffee market took a nasty setback at the start of this week, with prices dropping well below last Thursday’s highs for the move. December coffee came under heavy pressure yesterday and finished the day sharply lower, although a late rebound took prices well above the early lows. A negative tone for commodity markets due to elevated global risk concerns was the initial source of weakness. A big rally in the Dollar was also seen as a negative factor for coffee prices. Reports that coffee exports from Vietnam this month could be more than 20% above the August levels put additional pressure on prices. Early estimates are calling for Brazil to export anywhere from 30 to 31 million bags during the course of the 2011-12 crop season. ICE exchange coffee stocks were down 4,860 bags to 1.463 million as of September 6th, with 8,658 bags pending review.

TODAY’S GUIDANCE: Improving economic sentiment along with a weaker Dollar should help to keep coffee prices well supported this morning. Recent estimates for upcoming Brazilian production will be difficult to overcome, but a retest of last week’s highs is possible if commodities see a broad-based rebound later in the session.

TODAY’S MARKET IDEAS: Tuesday’s sharp pullback may have relieved some of coffee’s overbought condition, although there may be some choppy trading ahead given the volatility of outside markets. Support looks to be coming in around the 281.50 level this morning, but a pullback to 278.00 would be a stronger opportunity for entering the long side of the market.

Below is a sample of The Hightower Report’s 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 coffee market finally showed some strength during yesterday’s session, although prices have a long way to go to recover from last week’s plunge. September coffee was able to make a strong move to the upside, ending the session with sizable gains while moving further away from the recent lows. A broad-based rebound in commodity markets due in large part to global equities making a recovery provided the main source of strength for coffee prices during the session. Reports of tight coffee stocks in Vietnam and Indonesia remain a key positive factor for coffee prices, as scarce supplies have led to an increasing number of export defaults. Officials in Honduras are projecting their nation to export 4.6 million bags of coffee during the 2011/12 season, a record amount that will make Honduras the largest coffee exporter in Central America. Coffee producers in Colombia expect to reach their earlier forecast of 9 million bags this season in spite of heavy rains earlier this year. Cooler weather over Brazilian coffee production areas has raised the prospect of freezing temperatures during the next few days. ICE exchange coffee stocks were down 2,820 bags at 1.496 million for August 11th, with 2,520 bags pending review.

TODAY’S GUIDANCE: September coffee has been unable to build on Thursday’s sharp rally so far this morning, but broad-based strength in other commodity markets and a weaker Dollar may help to lift prices back towards last week’s highs. The performance of global equity markets today could play a larger role than coffee’s own supply/demand setup.

TODAY’S MARKET IDEAS: September coffee could retest resistance around the 243.50 level this morning, and a move through that area could lead to prices moving well clear of last week’s lows for the move. If macroeconomic sentiment turns negative, coffee prices could see a retest of the lows.

Below is a sample of The Hightower Report’s 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 coffee market remains weak, finding little carryover support from other commodity markets. Yesterday, September coffee could not hold its early gains, once again coming under pressure and finishing the session with heavy losses, this time at its lowest closing price since late January. Those losses were sustained in spite of a large Dollar sell-off that provided broad-based support for other commodity markets. Mild temperature over Brazilian production areas have further eroded coffee’s recent “frost” premium. Indications of a large decline in coffee exports from Vietnam during June may have been offset by news that 2011 exports were running ahead 2010 totals. Producers in Vietnam have been holding onto their remaining supplies from this season’s crop, which may explain June’s export decline. There are indications that coffee exports from Indonesia this year will fall more than 30% from 2010 totals. ICE exchange coffee stocks were down 21,596 bags to 1.560 million as of July 19th, with 17,810 bags pending review.

TODAY’S GUIDANCE: September coffee has been unable to take advantage of a weaker Dollar and remains near the low end of the recent sell-off. The market may need to receive further bullish supply news in order to recover from these severe losses.

TODAY’S MARKET IDEAS: September coffee may find support around the 243.00 and 241.50 levels, with resistance coming in around 249.00 and 251.50. A downside breakout could occur if support levels are taken out, but there are enough positive fundamentals to leave the market vulnerable to a sharp rebound from the current price levels.

Below is a sample of The Hightower Report’s 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 coffee market may have found a near-term bottom this morning, but has a long way to go before recovering from recent heavy losses. September coffee continued to plunge to the downside during yesterday’s session, ending with heavy losses for the fourth day in a row. Since the beginning of last week’s trading, the coffee market has fallen close to 22 cents for close to an 8% decline in contract value. Updated weather forecasts for Brazilian coffee production areas are calling for warmer and dryer weather, which continues to diminish the chances for a damaging freeze to this season’s upcoming production. A report that coffee production in El Salvador this upcoming season may fall over 20% from last season provided very limited support for the market. However, recent indications of strong export levels from Central American producers have pressured the coffee market during the last few weeks. There have been export delays reported in Vietnam due to that nation’s continued tight coffee supply situation, with the potential for default if quantities cannot be found. ICE exchange coffee stocks were down 6,925 bags to 1.657 million as of June 20th, with 2,845 bags pending review.

TODAY’S GUIDANCE: Today’s recovery in the coffee market may not be large in magnitude so far, but at least has put the brakes on this recent large-scale pullback. Supportive fundamental news may be needed to underpin these gains, or a further test of this week’s lows could occur.

TODAY’S MARKET IDEAS: Near-term support will come in around the 246.00 area, with prices finding resistance around the 250.00 level. September coffee may need to stabilize near these current price levels before making the next move.

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After showing signs of strength during the past few sessions, the coffee market fell rapidly back towards the recent lows for the move yesterday. July coffee posted huge losses for the session, giving back most of the gains made during last week’s rebound from 31/2-month lows. Updated weather forecasts for Brazilian production areas are calling for well needed rains, but temperatures are also expected to remain well above freezing levels during the same period. A report that coffee exports from Colombia during April were more than 30% above last season’s levels also was seen as putting pressure on the market. Key coffee producers in Central America have also indicated strong exports levels for April. In addition, a mild recovery in the Dollar also proved to be a negative factor for the coffee market. There are some ideas that Vietnamese producers may be provoked by this sharp pullback to unload further supplies over the rest of this week. ICE exchange coffee stocks were up 990 bags to 1.669 million, with 21,804 bags pending review.

TODAY’S GUIDANCE: July coffee made a early rebound this morning but has only rose back towards the middle of last week’s wide trading range. Pressure on the Dollar today could help coffee extend this morning’s recovery.

TODAY’S MARKET IDEAS: Broad-based support for commodities off of a weak Dollar may help July coffee retest short term resistance around the 265.50 and 267.50 levels, with 259.50 as light support.

Below is a sample of The Hightower Report’s 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!

July coffee has outside market support to start this morning, with a weaker US Dollar and general strength across most commodity markets. The market appears to be in the process of relieving the extremely oversold condition from the May, having registered an inside day yesterday. Roasters appear to have been active cash buyers in recent sessions, but it is possible that their short term needs have been satisfied. This may leave the market in search of another catalyst to move higher. Perhaps strong cash markets for Vietnamese coffee, as producers there hold back from selling on expectations of increased demand ahead, and prospects that a large portion of their output has already been committed might lend some support. A smaller than expected Columbian mid-crop could be seen as a positive for New York coffee. However, the latest estimates from Cecafe forecasted total coffee output in Brazil slightly higher than government forecasts. The 2011 harvest is expected to be largest ever for an off-year in Brazil’s coffee harvest cycle. This comes on the heels of ideal growing conditions and higher prices providing added incentive for farmers to properly care for crops. Reports yesterday from the Council of Green Coffee Exporters indicated that coffee exports out of Brazil were forecasted below April levels and expected to slip further in June. A recent report suggested that private stocks of coffee in Brazil may have fallen to record low levels in March, in the range of 6 to 7 million bags. ICE Certified coffee stocks declined 959 bags to 1,662,812 as of May 26th, with 42,936 pending review.

TODAY’S GUIDANCE: July coffee continues to build a short term base and could get a measure of support this morning from favorable outside market factors. It has an upside pivot level above at 269.45 that it needs to overcome for any meaningful rally to develop. Short term support comes in at 261.65.

TODAY’S MARKET IDEAS: July coffee has resistance at this week’s high of 269.45, and clearance above this level would set the stage for a further push toward $274.50.

Below is a sample of The Hightower Report’s 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 coffee market is losing the strength it had acquired off of the tight supply situation in Europe and North America. July coffee made a new low for the current sell-off yesterday, falling back from early highs to trade down at it lowest price levels since April 14th. A steady rise in ICE exchange coffee stocks has weakened the market recently, even though they remain close to 11-year lows. Projections that this season’s Brazilian coffee crop will have the largest “off-year” totals on record were also seen as negative. The Indonesian government has indicated that it will remove its levy on coffee bean exports. A recovery in the Dollar has added to recent pressure. ICE exchange coffee stocks were up 6,270 bags to 1.631 million, with 28,312 bags pending review.

TODAY’S GUIDANCE: An influx of coffee stocks has weakened the market, and it could keep prices on the defensive during the next several sessions. Unless there is news of fresh supply concerns, July coffee may continue to decline over the next few days. The coffee market’s weakness yesterday despite positive outside influences for commodity markets in general suggests that it may be turning away from its historic run to 14-year highs. Ideas that high prices last year will promote increased fertilizer usage worldwide plus ideas that Colombia production is on the mend are seen as potential negative forces. A bumper Vietnamese crop may also ease tightness. It will take a close back over 291.50 to expect a resumption of the uptrend for July coffee. Light resistance is seen at 287.00. July coffee support comes in at 276.70, and a move below that level could be seen as negative.