Morning Futures Roundup

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Coffee Hits Technical Bear Market

   Fundamentals
Coffee futures continued their slump due to an increasingly negative bias toward food commodities. The recent exuberance seen in the equity markets may be coming to the end in the wake of the seemingly inevitable downgrades of France and Germany by Moody's. Many large speculators, including hedge funds, have cut their long positions on food commodities to the lowest level in over two years. Not only are commodities facing outside pressure from economic growth concerns, but supply pressure has subsided quite substantially.

In Brazil, the likelihood of a potential strike for the port of Santos is almost nonexistent at this point. Cash market prices and demand have been extremely weak lately, as evidenced by the extremely weak cash market demand in Vietnam. The concern that Brazil's crop could fall as low as 50 million bags has been tempered by expectations that Vietnam will increase exports by 2.5 million bags due to the anemic domestic demand. On the ICE, certified stocks were up by over 8200 bags to 1.49 million.

   Technical Notes
Turning to the chart, we see the March Coffee contract broke through support at the 226.70 level. The move not only breaks support, but also confirms a downside breakout from a triangle pattern on the daily chart, given that the move lower from May highs is down just about 30%, which is the generally accepted percentage drop for a bear market. The RSI indicator has not yet reached oversold conditions, suggesting there could be more downside in the near-term.
   
     
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