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The uptrend in coffee looks to continue over the near-term as investors seek markets which may see production less than world consumption and commodity markets which are less sensitive to economic conditions. Coffee demand has a tendency to remain steady in times of recession and some argue that demand actually improves as more consumers make coffee at home instead of paying up at coffee shops. The technical action in coffee remains positive and the steady uptrend in open interest (the highest since early August) is a positive development and suggest building interest in ownership. A more aggressive selling stance from Vietnam producers in the past week as discounts widened may have contributed to the recent correction. May coffee closed moderately higher on the session yesterday and showed further follow-through buying after Thursday’s reversal-type action. A weak tone for the US dollar and ideas that the longer-term fundamentals are positive and that cash will continue to tighten into the summer helped to support. Good weather for Brazil and a lack of new news from Vietnam has kept the new news flow slow. The International Coffee Organization revised down their world production forecast for the 2008/09 season to 133.4 million bags from 134.2 million last month. Mexico exported 144,588 bags in January, down 36%. From the start of the marketing year in October, Mexico has exported 486,747 bags, down 28% from the previous year pace. Weather in Brazil remains favorable to crop conditions. US ICE exchange stocks fell 3,050 bags to 4.221 million with 26,817 bags pending review and the recent drop in stocks is seen as positive.
