Coffee Futures Bounce on Supply Risk

Coffee futures reversed course from its downward slide for its biggest gain in over a month.  The possibility of a strike and disrupting coffee supplies from the world’s second largest grower of the crop is what is on trader’s minds.

Coffee prices are have reportedly dropped below production costs so coffee producers in the growing region of Caldas will be meeting next week in an effort to receive higher government subsidies for the commodity.  As of yesterday, coffee futures are down 18% YTD.
           
Barb Levy, chief director for Futures & Options Xecution’s futures division in Chicago, had this to say regarding the current coffee futures situation, Coffee futures may be finding a bottom here, after a sharp decline in prices since May. The technical indicators are starting to signal a bottom in place, additionally the market is reacting higher to a potential upcoming strike by coffee producers in Columbia, the world’s second largest grower.”

Coffee futures remain in a strong downtrend with no bottom in sight.  Coffee futures are a volatile market so I am only looking for as low-risk initiation of positions as possible.

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