Today’s Spotlight Market
The International Coffee Organization expects a global Coffee supply deficit of 3.3 million 90-kg bags this season which would be the second consecutive season of a deficit. The outlook for next season is also negative as lower production is expected out of several major Coffee producing nations including Brazil, Columbia and Vietnam.??? ?
Fundamentals
Bullish traders appear to have embraced the Coffee futures market as prices are hovering near their 2016 highs. Among the fundamental factors attributed to the run-up in prices are concerns about Brazilian Coffee production in 2017 as the upcoming crop moves into the so called ?down cycle? for Arabica Coffee trees. A severe drought in Vietnam has curtailed the nations Robusta Coffee harvest, which is expected to be down over 10% this season. Higher prices for the ?lower quality? Robusta could prod end-users towards purchasing more Arabica Coffee which could help to support prices as demand increases. Some producers have also been reluctant to sell Coffee inventories to the export market, preferring to hold supplies in the hopes of higher prices in the coming months. Both large and small speculators are currently holding a net-long position in Coffee futures according to the most recent Commitment of Traders report. As of the reporting period ending October 11, the combined speculative position totaled 47,106 contracts. Should prices move to new yearly highs, we may see additional buying emerge as trend-following traders add to existing long positions and it will be up to the commercial hedgers to sell aggressively into the rally to keep further price gains in check.?? ?
Technical Notes? -? View Today’s Chart
Looking at the daily chart for December Coffee futures, we notice on Tuesday that prices attempted to test the 2016 high of 160.90 but ran into selling pressure as prices traded near the 160.00 price level. However, overall momentum still favors the bulls as prices remain well above both the 20 and 200-day moving averages and the 14-day RSI remains strong with a current reading of 64.41. The September 22 high of 160.90 looks to be key resistance for the December futures, with chart support found at the October 7 low of 145.20.??
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