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For the second time this week, July coffee closed right on a key resistance point and the sharp sell-off from the highs yesterday leaves the appearance that a near-term high is in place. The market needs a higher close today or futures will look somewhat vulnerable to a near-term correction. The outlook for tightening supply in the months ahead should help support but key robusta producers Indonesia and Vietnam continue to sell. July coffee closed slightly higher on the session yesterday and moved to the highest level since February 11th as outside market forces helped to support the market. A set-back in other soft markets like cocoa and sugar helped drag the market near 150 points off of the early highs. A continued slide in exchange stocks and ideas that stocks at producing countries are tightening in the months just ahead helped to support. Indonesia coffee discounts to London futures expanded in the past week as more producer selling emerged and there seems to be plenty of competition with Vietnam to move coffee on the world market now. Vietnam officials revised their coffee production forecast for the 2008 crop to 17.76 million bags, up 6.4% from their previous forecast but this is not a big surprise to the trade. Brazil exports for the March 1st to 25th time frame hit 1.644 million bags as compared with 1.807 million last month for the some time frame. Exchange stocks were down 7,401 bags to 4.012 million with 800 bags pending review.
TODAY’S GUIDANCE: Short-term resistance for July coffee comes in at 119.45 with support back at 116.95 and 114.55.
TODAY’S MARKET IDEAS: Consider taking profits on long positions and hold out for a correction before re-entry.
