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The market appears poised to move higher into early 2009 as long as outside market forces do not get in the way. Some dollar weakness and some strength in outside commodity market helped support the bounce overnight. If the dollar continues to weaken or at least just stabilizes, the trend may turn up in coffee into 2009. Coffee is one of the few commodity markets to reach a historically oversold condition recently and also one of the few commodity markets which is facing declining supply, a world production deficit and a relatively firm demand during recessionary periods. As a result, coffee is a strong candidate for a market which could lead commodities higher in 2009. There may have been more active than normal selling from producers in Vietnam and Brazil in 2008 with both countries harvesting large crops and producers with a little more incentive to sell stocks. As supply tightens in 2009, the buyers may begin to get more active. Vietnam exports picked up in December according to officials from there and this helped push exports for the calendar year to 16.74 million bags, down 18.4% from last year. Traders suspect a large export total this coming year as the crop harvest was much larger. March coffee took out the highs of Tuesday and Wednesday early on Friday but prices remained well short of Monday’s highs. Coffee found support in conjunction with higher price levels in an array of commodity markets. The firm tone in the industry comes from a lower dollar and higher crude oil as well as short covering and moderate fund buying in a variety of markets. Volume was light. Weather in Brazil continues to be favorable in Minas Gerais and Sao Paulo with scattered showers and thunderstorms seen late last week and more of the same forecast through the weekend. ICE daily exchange stocks were down by 1,275 bags to 4.433 million with 20,258 bags pending review.
TODAY’S GUIDANCE: Cash tightness for Colombia in Europe to continue to provide some underlying support. With a positive longer-term outlook, traders might consider bullish option plays for 2009.
