Posts Tagged ‘coffee’

Brazil Crop Concerns Send Coffee Futures Soaring

The drought in South America that previously sent coffee futures soaring nearly 90% this year is coming back for an encore. Arabica-coffee futures have blasted-off to the upside all this week and today the technical trend has reversed to the upside.

A crop-forecaster in Brazil states the coffee crop is entering the main flowering stage that will be ready for harvesting in May, however, coffee-farmers are expecting a two-week dry-spell this month that will most likely hurt crop. What this means is that a persistent lack of moisture presents irreversible damage to the coffee trees – which is exactly what coffee futures are responding to.

The technical trend for coffee futures is now “up” as of today (as previously mentioned). Now I will need for coffee futures to pullback, or consolidate, before initiating any position. Coffee futures has been a good market for me this year, but the initial margin requirement is so high it requires me to be cautious with the trades.

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Coffee Production in Brazil Set for Longest Decline in Almost 50 Years

Coffee futures are once again poised for more upside action as prolonged drought in Brazil is claiming much of that nation’s coffee crop. Coffee farmers are preparing for the worst as Brazil heads for its first three-year production decline since 1965.

Production from the world’s top-grower of the Arabica Coffee variety is expected to drop as much as 18% (from last year at this time) when the harvest ends next month – this coming from a 3.1% decline only last year according to Brazil’s National Coffee Council’s estimates. The Council also estimates coffee farmers collecting less of a harvest next year which would be the longest slump since the mid-’60’s.

Christian Moreno, a commodities broker for HighGround Trading Group in Chicago, shared his insight regarding the current coffee futures situation by stating, It appears as if the only way out of the coffee situation in Brazil is a miracle of much needed rain.”

The trend for coffee futures has resumed up since late last month. The initial margin requirement for coffee futures is $5,700 per contract so I must choose the trades wisely. I have coffee futures higher (in my work & studies) into the end of the week. With coffee futures up 940 points today, our target is about 700 points higher.

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Lower Crop Estimates in Brazil Mean Lower Coffee Futures

Coffee futures appear to be in an all out down trend since the middle of last month thanks to a change in weather where it was needed most. Coffee futures respond most to Brazil’s status as the world’s top exporter & producer and recently they have experienced enough rains to ease drought damage for their coffee plants.

Brazil’s Agriculture Minister has gone on record as recently saying last month’s rains have reduced the impact of the worst dry-spell in 50 years for coffee growers – less severe coffee crop damage than estimated. He went on to say that farmers may realize a “bumper” coffee crop next year.

Kevin Craney, Director of Managed Futures at RJO Futures in Chicago, had this to say regarding the current coffee futures situation,With supply concerns dissipating due to recent rains the trend in the coffee (futures) market is bearish. So long as these supply concerns are kept in check, then this market will continue its downward trajectory.”

Coffee futures trend is down with the market extending their lows in the past two trading sessions. I have to be especially selective which coffee trades we take due to an initial margin requirement of over $8,000 per contract in order to maintain a 25%-30% margin to equity ratio standard.

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Indonesia Demand Seen Climbing to Record; Coffee Futures

Coffee futures will have to contend with Indonesia’s growing consumption & demand in the next two years. Coffee industry experts there expect consumption to spike by a record one-third as income and population increases on the island nation.

The chairman of the Association of Indonesian Coffee Exporters & Industries claims coffee demand will probably rise to 400,000 metric tons in 2016, from what is predicted to be 300,000 this year, and what was 260,000 last year. Indonesia is the third-biggest grower of the robusta coffee variety, and rising domestic demand there may reduce supplies of their own use – where robusta is said to account for 80% of the use.

Kevin Riordan, director of research at Capital Trading Group in Chicago, had this to say regarding the current coffee futures situation,Demand for coffee in Indonesia is likely to increase due to a rising population and quality of life increase as well. An improvement to the quality of coffee itself will also improve demand.”

The trend for coffee futures remains up, however with a top (temporary) possibly in sight. I am having challenges trading coffee futures at the moment because initial margin for this market is just over $8,000 per contract. Having a position in this market, plus gold at the same time (along with other markets), is asking for too high a margin vs. equity scenario.

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Rain in Brazil May Aid Crops, but Sinks Coffee Futures

Coffee futures have plummeted nearly 6% from last week’s highs since a recent forecast of rain in Brazil’s coffee growing region boosts the prospects for their crops.  Coffee futures’ move lower is the biggest drop in prices in more than three weeks during a time when the world’s biggest grower and exporter of coffee beans has been coping with the worst drought in decades.
 
The drought in Brazil during January and February definitively reduced coffee crop prospects, which caused coffee prices to soar 76% so far this year.  In the next week to a week-and-a-half, however, above normal rainfall is expected in the coffee growing areas that need it most.

The prospects of wet weather are driving coffee (futures) prices down and increasing volatility.  Any rain is welcome as concerns over Brazil’s coffee crop following the worst drought in decades continue to dominate the market,” stated Matt Zeman, a senior commodity broker at Kingsview in Chicago, regarding the current coffee futures situation. 

Coffee futures trend has flip-flopped down from up, and is currently up.  The initial margin requirement for coffee futures is just over $8,000 bucks per contract so in order for me to initiate a position I will await a contraction in volatility on a pull-back in prices. 

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Drought Woes Send Coffee Futures to $2 Bucks

For the first time in about two years, coffee futures have hit $2 per pound with the ongoing drought conditions that started in January in Brazil.  Coffee futures reflect eroding prospects for the world’s biggest exporter and producer of the product.
 
The current rains helping coffee crops are expected to disperse soon and dry conditions in Brazil’s top-producing state is expected to continue.  They are having the driest summer since 1972, and is leading a coffee importer to cut the crop forecast by 10%.

Coffee futures have hit two year highs as the ongoing drought conditions in Brazil call into question the size and scope of this year’s crop,” said Matt Zeman, a senior commodity broker at Kingsview in Chicago, regarding the current coffee futures situation.

Coffee futures up-trend has no sign of topping anytime soon.  The margin requirements for holding coffee positions have shy-rocketed to $7,920 so I have to be very selective about taking a position in this market.

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Weather Scare Extends Coffee Futures Gains

Coffee futures blasted-off early in Tuesday’s trading session when it was estimated a whopping 10% of Brazil’s coffee crop may be lost due to lack of rain.  Coffee futures are already up 21% this month alone with the driest rainy season in over 20 years and a heat wave, has had its toll on Brazil’s agriculture.

The estimation of a 10% loss of Brazil’s coffee crop comes from an export manager at that country’s second largest coffee exporter.  To make matters worst, the forecast for rain in Brazil’s coffee growing region is to be below average.

Laura Taylor, a senior commodities broker at RJO Futures in Chicago trading coffee with me, had this to say regarding the current coffee futures situation,For the next two to three weeks commodity traders may find the coffee market to be in a choppy, sideways trend awaiting the next crop survey to see what the exact damage is.”

The trend for coffee futures is UP – with no top yet in sight.  We just exited our long coffee futures position (initiated late last week) early this morning before many of us even awoke.  This is why I have the BEST BROKER TEAM and PLAN OF ACTION each time we participate in these commodity markets – to anticipate these moves.

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Coffee Futures Near Lows Before Record Vietnamese Crop

Coffee futures have been flirting with their lows these last two weeks reportedly in anticipation of a record “Robusta” coffee crop in Vietnam.  Coffee futures ended the day only up slightly.

Vietnam – the world’s biggest producer of the “Robusta” variety – is forecasted to harvest a record 29M bags of coffee for the season that starts this month.  Coffee prices have fallen since rallying last week, but still maintaining in the trading range of last week.
           
Coffee (futures) are under pressure due to a huge supply from around the world.  While oversold, the coffee market still lacks fundamental news to move higher,” said Christian Moreno, a commodities broker for HighGround Trading Group in Chicago, regarding the current coffee futures situation.  Moreno added,We might see oversold bounces from the Oct 1st lows but probably something to sell into.”

The trend for coffee futures is down with no “bottom” yet in sight.  This is a very thin market that is only suitable for larger sized accounts.

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Pests & Rain in India Can Be Bullish for Coffee Futures

Coffee futures will have to digest the supply/demand situation once again after India’s crop, which was forecasted to have a record-breaking coffee crop, is now threatened by torrential rain and pest attacks.  Coffee futures closed down minimally today, but has also extended its lows and resuming its overall downtrend.

India is Asia’s third-largest coffee exporter and is now expected to forfeit 30,000 tons less product after the biggest rain downfall in two decades not only damaged the beans, but increased pest attacks.  So will this event even put a dent in the arabica-type inventories that are expected to climb to their highest amount since 2009?
           
Technical indicators are oversold in coffee (futures).  With a 9 RSI reading under 30, the coffee market is extremely oversold.  Also, the last Commitment of Traders (COT) report showed trend-following fund traders net short a little over 27,000 contracts as compared with the record net short of 39,330 meaning a short covering recovery might be in the cards soon,” said Christian Moreno, a commodities broker for HighGround Trading Group in Chicago, regarding the current coffee futures situation.

Coffee futures downtrend still prevails with absolutely NO BOTTOM yet in sight.  Let’s look for a bounce higher for the next opportunity in this market.

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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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