Can Coffee Make A Comeback In 2016?
Today’s Spotlight Market
After being one of the worst performing commodities of 2015, Coffee bulls are hoping for a turnaround in 2016.? It does appear that the world may be heading toward a deficit year, but the demand side of the equation could be a problem.? China, India and Brazil have been a major driving force for Coffee demand, as those countries? tastes grow increasingly Western. The recent economic headwinds faced by the BRIC countries could result in demand failing to meet these projections.
Fundamentals
Brazil had a bounce-back year in 2015, harvesting an estimated 58 million bags, up from 48.4 million bags in the drought stricken 2014 crop year.? Some estimates suggest that the Brazilian harvest could hit 60 million bags.? In Columbia, traders are looking for an output of around 14 million bags in 2015, up from 12.1 million bags in 2014.? Traders may want to keep an eye on the El Ni?o weather pattern, which could linger well into this year.? If it brings dryer weather to Columbia, bean quality there could be significantly reduced.? Currency markets could be a limiting factor for Coffee prices.? A stronger US Dollar has already weighed heavily on commodity prices and Coffee was no exception.? Weaker Latin American currencies, in particular, could encourage farmers to export supplies as quickly as possible in exchange for US Dollars.? Turning the focus to the global market, traders are looking for a smaller deficit of 2.5 million bags in 2015-16.? The 2014-2015 crop year is estimated to have closed out at a deficit of 7 million bags.? Ultimately, Brazil?s success, or lack thereof, could be the major story for Coffee this year.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the March Coffee contract drifting steadily lower.? The slope of the down move is flattening, but has not yet shown a definitive sign of plateauing or bottoming out.? Prices could drift down toward support around the 106.00 level or, possibly, even the 2013 lows near 101.00.? Solid closes above the 100 day moving average may be needed to confirm a shift or change in the downtrend.? Currently the oscillators are neutral, leaving the down open for possibly more downside.
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