Coffee Prices Grind Lower
??? Fundamentals
Coffee Futures prices keep moving lower, as traders have started to concentrate on next year’s crop, which by early appearances looks to be off to a good start. Though this coming season is the “off” year for the Arabica crop in Brazil, the world’s leading Coffee producer, the market is still reeling from a record Brazilian harvest this past season.
Current old crop estimates are for production to have totaled nearly 56 million bags, or nearly 7 million bags above last year’s totals. Previous government estimates were for only 50.5 million bags produced. Though it is expected that this year’s harvest will be between 5 and 6 million bags lower, the potential for higher production in Colombia should help to offset any potential shortfalls.
Analysts are awaiting the bi-annual USDA World Trade and Markets Reports for Coffee, which will update the global forecast for this past season and next. Large speculators are currently net-short Coffee futures, with the most recent Commitment of Traders report showing a short position totaling just over 24,000 contracts as of November 13th.
This could be the catalyst for a potential short-covering rally should we see a commodity-wide rebound, or of weather conditions take a turn for the worse in Central and South America in the coming weeks.
?? Technical Notes
Looking at the daily chart for March Coffee, we notice prices hovering within a relatively narrow 10-cent range between 150.00 and 160.00. The 20-day moving average is currently keeping any rally attempts in check, which has been the case since the steep sell-off began back in early October.
The 14-day RSI is neutral to weak, with a current reading of 41.01. The November 2nd high of 160.10 looks to be the next resistance level for March Coffee, with support found at the recent low of 149.45.
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