Coffee Prices Grind To New Lows
?? Fundamentals
The bear market for Coffee prices may be cooling now, as a large speculative short position combined with uncertain prospects for Coffee production in 2013 may finally put a temporary halt to declining prices. Increased production from Central American producers has added supplies to the market in November, with exports up nearly 20% from the previous year.
Brazilian Coffee trees have fared well through the flowering stage, and ideal weather conditions may force analysts to raise their estimates for 2013-14 production totals. Vietnam is increasing its exports of Robusta coffee, as huge near-term supplies are depressing domestic prices now that the harvest is nearly complete.
Though current fundamentals seem to favor Coffee bears, the longer-term outlook is more supportive. With Coffee prices hovering near $1.40 per pound, we may start to see South American producers curtail their expansion plans due to lower prices. This may begin a trend of lower production totals out of South America in the coming years, as upkeep and maintenance costs are slashed.
?? Technical Notes
Looking at the daily chart for March Arabica Coffee, we notice prices trading at levels not seen since late 2010, as the bear trend continues.
Despite the sell-off, the 14-day RSI has not yet reached oversold levels, with a current reading of 38.57. Psychological support is seen at 140.00, with resistance found at the 20-day moving average, currently near the 148.55 price area.
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