Coffee

Market Watch: 7/8/2016

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Hot Coffee…

Weather (rain and then a frost) created
the impetus for what had begun as a short covering rally and then, once other
moving averages were breached, new buying for the commodity index traders and
funds.  The coffee futures market was one
of the best performing softs commodities for the quarter.  Prices extended near 1.4800 basis September
in late June and one could argue now that a “double top” exists.

In addition to the weather factors, we
also saw a very strong Brazilian Real and that currency strength certainly
helped support prices in the same time frame:

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Perhaps coincidence, perhaps not, both
the double top mentioned earlier and the top in the currency move occurred at
or about the same time (June 30th).
The uptrend line above will show that there is plenty of room for a
corrective sell-off for the Brazilian Real, and plenty of room to maintain its
uptrend.  

We will once again point to the diminishing
quantity of certified coffee stock at the exchange.  ICE Certified Stocks are now under 1.30
million bags.  This is the lowest level
of certified stocks at the exchange since late 2011.  However, it should be pointed out that world
stocks are well above the levels of 2011 and are expected to be in excess of
20% higher than had been available in 2011-2012.

The market certainly gives us reason to
believe the trading range has now adjusted (higher and wider) to 13000 and
15000.

We include some
brief origin notes below:

·
In Brazil, as mentioned, the currency has had a
very big impact on coffee prices.  Keep a
watchful eye on currency moves and do not be surprised if in light of the
exposure Brazil will receive during the 2016 Summer Olympic Games, currency
volatility expands during that time period.
 Colombia is dealing with delays due to a trucker
strike.  Weather patterns in Colombia
seem to have normalized and new crop developments could be more favorable than
had been thought of recently.

  • ·
    Centrals have all done well selling this crop
    and most farmers are resuming normal activities apart from shipments of coffee,
    which are generally quiet.
  • ·
    Overall worldwide production numbers published
    by the USDA show 153 million bags of production for 16/17 compared to 150
    million for 15/16 and 149 million the year prior.
  • ·
    Centrals have all done well selling this crop
    and most farmers are resuming normal activities apart from shipments of coffee,
    which are generally quiet.

    ·
    Overall worldwide production numbers published
    by the USDA show 153 million bags of production for 16/17 compared to 150
    million for 15/16 and 149 million the year prior.

    Once again, this outline is intended to
    promote thought and an exchange of ideas.
    If you have an interest to share your point of view, please do not
    hesitate to call me.

    Good luck and please have a great
    summer!

    Fred Schoenhut

    Royal Coffee New York,
    Inc.

    (908) 756-6400

    *The risk of
    loss in trading futures and/or options is substantial and each investor and/or
    trader must consider whether trading is a suitable investment.  We do not guarantee that such information is
    accurate or complete and it should not be relied upon as such.  

    Anthony Chango