Coffee Prices Cool But Bullish Fundamentals Continue To Percolate
Today’s Spotlight Market
A large long position being held by speculators may contribute to further price weakness in the short-term as weak longs are forced out of the market as prices move lower. The Commitment of Traders (COT) report has the combined non-commercial and non-reportable net-long position totaling over 54,000 contracts as of October 14th. How much this net-long position declined during this week?s sell-off will be reflected in this afternoon?s COT report. Long-term traders may utilize recent price weakness to establish new long positions in 2015 Coffee futures, as there remains continued uncertainty as to how the Arabica trees fared following this season?s devastating drought.????? ?
Fundamentals
Coffee bulls cup of java appears to have turned cold as the upward momentum has stalled as prices approached multi-year highs. Analysts attribute weather forecasts calling for much needed rains to reach the Brazilian Coffee growing regions in the coming days as a catalyst for profit-taking selling, as prices reached the $2.25 per pound level. This needed moisture has relieved some of the fears of repeat of drought conditions that plagued this past season?s Coffee crop, causing production to fall to 3 year lows. The concerns for the 2015-16 season?s production were heightened as it is the ?off-year? for the 2 year Arabica Coffee production cycle, which normally sees lower production totals. While timely rainfall will help with next season?s production, there remains some concerns that this past seasons drought has delayed the flowering stage and with the trees already in a compromised state, even subdued production estimates might be difficult to reach. If true, Coffee bulls may once again see a ?jolt? in prices as we move into the South American summer.?? ?
Technical Notes – View Today’s Chart
Looking at the daily chart for December Coffee, we notice prices are now in a ?correction? phase as Coffee bulls failed to propel prices above resistance near the 225.00 price area. Monday?s chart ?gap? lower opening took prices below the 20-day moving average (MA), which added further selling pressure from short-term momentum traders. The 200-day MA has not been tested since February of this year and might end up as the next support target for Coffee bears. Chart support is seen at 176.40, with resistance found at 208.50.
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