Coffee Prices Grind Lower Despite ?El Nino? Forecast
Today’s Spotlight Market
Brazilian Coffee exports have been on a tear of late, rising by over 12% to 32.7 million bags for the 2014-15 season. However, last season?s subpar production totals could put an end to the aggressive export pace as the nation?s exportable supplies dwindle ahead of this coming season?s harvest.? ?
Fundamentals
Traders are finding little in the way of fundamentals to ?perk-up? Coffee futures prices of late, as the lead month July futures are trading at lows not seen since December of 2013. It appears that the market is looking for Brazil?s Coffee production to rise sharply this season, with some more optimistic analysts looking for production to potentially reach 53 million bags. This is good news for producers who saw production fall to a disappointing 4.3 million bags last season. The expected increase in Brazil?s Coffee production for the 2015-16 season appears to be significant enough for some private forecasters to predict that the market will move to a small global surplus in 2016. While the current production forecast looks bearish for Coffee prices in the coming months, it appears that market participants are not placing much of a ?weather premium? on prices — especially with weather forecasters calling for a much above normal chance of a strong ?El Nino? weather event.? Historically, El Nino?s have caused unusual weather patterns across the globe, including a pattern of dry conditions across Southeast Asia, which is a major production area for Robusta Coffee. If this year?s El Nino event materializes as forecasted, we could see both Vietnam and Indonesia face potentially serious production issues, which could significantly change the price outlook for Coffee futures prices later this year and percolate interest in Coffee futures for trend following traders.?? ?
Technical Notes? – View Today’s Chart
Looking at the daily chart for July Coffee, we notice prices have been trending lower since the recent highs were made back in October of 2014. Prices appeared to be forming a consolidation trading pattern between 130.00 and 150.00 until the past few trading sessions, when aggressive selling pressure sent prices below support at 130.00 with little in the way of end user buying to curtail the down move. Prices are now trending away from the 20-day moving average and the 14-day RSI has turned weak, with a current reading of 34.63. 121.15 is now seen as the next support level for the July contract, with resistance found at 143.85.??
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