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The market seems to have the short-term positive fundamentals to push through the April highs and challenge to January highs soon. A tightening supply in Central America and in key producer Brazil along with a steady decline in exchange stocks should help provide underlying support. Honduras’ exports in April reached 481,337 bags, up 4.4% from last year, while exports from Guatemala reached 436,431 bags, down 16.8% from last year. Cumulative exports since October are down 10.8% from Guatemala and down 8.9% from Honduras. July coffee pushed to a new high for the move yesterday in two-sided trade with the market at times finding support from bullish outside market influences. Coffee seemed to be underpinned by the weak Dollar which tends to raise the appeal of commodities as an inflation hedge. We also suspect gains in equities provided broad commodity market support, with some spillover buying interest seen in coffee. However, a holiday in London made trading conditions thin and choppy, and there didn’t seem to be enough fresh fundamental news to lift the market above the $1.22 resistance level. Brazil exported 2.319 million bags of coffee during the month of April, which was up from 2.302 million bags in March and up from 1.999 million last year. The USDA attache in India revised their coffee production forecast for the 2008/09 season down to 262,300 tonnes (4.4 million bags) and indicated that timely blossoms in March set the crop estimate for the 2009/10 season to 295,000 tonnes or near 4.9 million bags. The market seems to have the fundamental setup to move to a higher price level, as cash price premiums in Central America and Colombia remain near record highs and demand appears strong enough to spark increased investor interest as well. Exchange stocks were down 80 bags to 3.817 million with 11,910 bags pending review.
TODAY’S GUIDANCE: A firm tone to prices in Vietnam along with a weak tone to the US dollar leaves the market in a position to push higher over the near term.
