Coffee prices… is this a test, or has something changed?

Your RNY Market Watch, November 2016 update on coffee prices.

As you will see in the chart above and the following chart, the market may be at a crossroads. Is this a correction that will take the New York Market back to the support of the upwards trend line? Or is this more of a trend change where the London market is showing us a breach of the shorter moving day averages, which would be a warning for a deeper correction to begin in that market? If the latter is true, New York might have further to go as London has (up to now) held their mid-September lows while New York has not.

The certified stock numbers (above) continue to reduce, but the pace has slowed somewhat. The monthly GCA numbers (below) continue to show us that exporting countries prefer to move their inventory to importing countries.

The Brazilian currency has continued its steady surge to higher price levels, which helps support coffee prices. This factor, along with the erratic Brazilian weather this summer (4 mini frosts) and the decrease in robusta production has many concerned about shipments out of Brazil this year. Internal stocks have not had the chance to be rebuilt to levels approaching where they were before the previous drought. Delays are coming out of Brazil, but differentials for Brazilian coffee have been stable.

Origin Notes:

• Robustas:  In general will not match their export potential of a year ago.  The fact that the London futures market moved over 20% higher for the year underpins this fact. While a correction might be considered healthy for the market, the trend we see and the robusta shortages that are evident, should keep that market steady.
• Colombians and Centrals:  All have seen considerable amounts of coffee available.  Of this group Colombia and particularly Honduras have seen good year on year improvements in quantities.
• Ethiopia: Differentials have tightened and offers have been limited. Considering the recent rally in futures prices, one might expect that diffs would be softening, they have not.

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 contact us.

Good luck and please look for us at the MANE Coffee Conference, November 3rd to 5th in Providence, RI.

*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.