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A slowdown in the selling and a steady open interest for the first time in a while has helped stabilize the coffee market back near the April consolidation. September coffee is already down as much as 18.6% off of the June highs as an aggressive long liquidation trend from speculators and funds has helped pressure. September coffee in London posted a contract low overnight but managed to move back up near the highs with talk of the extreme oversold technical condition helping to support. Ideas that the total coffee supply is on the rise with the Brazil harvest and talk that the high end of the market (Colombia premiums) has stabilized and that more Colombia coffee will be available with a larger crop this fall has helped drive the market lower. Indications from the head of the International Coffee Organization that Colombia production is expected to jump to near 12 million bags this season from under 10 million last year combined with talk that next year’s coffee crop from Brazil could be as high as 60 million bags from near 40-43 million this year added to the bearish tone. The coffee market pushed lower on the session yesterday and down to the lowest level since late April as the firm tone in other commodity markets and a sharply lower dollar failed to attract much in the way of new buying interest. Some light trade house selling and ideas that the Brazil harvest could be a little higher than initial believed helped to pressure. A continued long liquidation trend from fund traders was noted as another bearish force. Vietnam prices are also in a downtrend and pushed to near 27-month lows this week. The Brazil weather outlook remains near ideal for harvest as dry conditions could keep harvest active and there are still no significant cold weather scares on the horizon. Colder weather is expected into the weekend in coffee growing regions of Brazil but no damaging frost is expected. US exchange stocks were down 24,123 bags to 3.642 million with 42,056 bags pending review.
TODAY’S GUIDANCE: The market is now extremely oversold and downside momentum appears to be slowing. Close-in support for September coffee comes in at 118.40 and we would not be surprised to see a recovery bounce to 124.00.
