Brazilian Production Key To Coffee Price Outlook For 2014
Today’s Spotlight Market
The potential size of the 2014-15 Brazilian Coffee crop may be the determining factor for whether this global commodity market will be in a surplus or deficit. Late last year it appeared that Coffee supplies would outpace demand by as much as 5 million 60-kilo bags according to analysts. However, recent private forecasts calling for a Brazilian crop as low as 51 million bags could quickly reverse the supply/demand outlook and actually turn the market into a deficit, potentially by as much as 5 million bags, should the most dour production estimates be realized. Front month Arabica Coffee futures prices now appear to be stabilizing near the 120.00 price level, as traders become cautious awaiting further confirmation as to the potential size of this season?s Brazilian Coffee crop. ?
Fundamentals
Coffee traders are being whipsawed by conflicting private forecasts regarding the potential size of the 2014-15 Brazilian Coffee crop. Initially, forecasters were calling for Brazil to produce a record 60 million 60-kilogram bags this coming season, as this season is the ?on? year for the Arabica crop. However, the past two weeks have seen some trade houses lower their estimates to between 51 and 53 million bags on the premise that Coffee producers have trimmed production due to heavy tree pruning, as well as reduced spending on inputs such as fertilizer as prices fell to near 5-year lows. The actual size of the Brazilian Coffee harvest will be critical for determining the supply side for Coffee this season, as higher production out of Colombia is being offset by lower Central American output due to a Roya fungal outbreak. Coffee prices recently have been buoyed by slow producer selling out of Vietnam, as growers in the world?s largest Robusta Coffee producing country have been holding supplies off-market in hopes of seeing higher prices. However, reports of increased producer selling the past several days are starting to weigh on futures prices, especially after the Coffee Exporter?s Council estimated Brazilian Coffee exports of nearly 33 million bags this year, which if accurate should help to alleviate potential tight supplies for Coffee importers.???????? ?
Technical Notes? – ? View Today’s Chart
Looking at the weekly continuation chart for Arabica Coffee futures (symbol KC), we get a clearer picture of how volatile Coffee prices can be. Prices have ranged from lows below 50 cents per pound to as high as over $3.00 per pound within the span of only a few years! While prices are currently well below the near-record highs seen back in 2011, prices are still well within the ?average? price range seen the past 40 years during periods where supply and demand were relatively balanced. Price ?extremes? usually do not occur until lead month futures trade above $2.00 per pound or below $1.00 per pound, and prices between these price barriers must be considered within the historic range for this commodity.
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