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The market has already reversed and worked lower for the past five trading sessions during a period of bullish outside market forces for commodity markets. This relative weakness is a negative factor for the market and the situation could turn more negative if outside forces sour. Weather has been a negative force for the past week or more as Brazil has dried out and there should be less quality concerns moving ahead. The coffee market pushed sharply lower on the session yesterday with more follow-through selling overnight. Talk of better weather in Brazil, failure to respond to the upside after receiving bullish influence from the dollar and other commodity markets and talk of the overbought condition of the market helped pressure. The market is still operating under the negative technical influence of the August 10th reversal-type action. The International Coffee Organization pegged the world coffee production for the 09/10 season at 127.0 million bags from 127.3 million last year. Consumption for 2009 is expected to come in near 129 million bags. While this is somewhat supportive, traders expect a 2010 Brazil crop near 9-12 million bags above this year. Brazil kept up a heavy export pace for much of 2009 ahead of the harvest which may mean that the crop last year was better than expected and traders see the outlook for a bumper crop next year as a potential negative force. US exchange stocks were up 2,017 bags to 3.498 million with 14,788 bags pending review.
TODAY’S GUIDANCE: The overbought condition combined with the lack of a reaction to positive outside market influence could spark a short-term correction or at least a consolidation of recent gains. Look for continued weakness for now.
