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Seasonally stronger demand from end users into October and a continued weak US dollar are factors which could provide underlying support to the coffee market over the near-term. The focus of attention for the market is shifting away from Brazil supply and to the demand outlook for this season. Brazil is also in the process of accumulating near 10 million bags of the 2009 coffee crop to pull off of the market for strategic storage which may help keep the coffee off of the world market and provide some support for the next few months. There is a longer-term concern that next year’s Brazil crop will be a bumper but this may be too far off to be concerned now and the short-term focus on demand and on the weakness in the US dollar and strength in gold and other commodities may be enough to keep the short-term trend up. December coffee closed moderately higher on the session yesterday and up 300 points from the lows of the day after choppy and two-sided trade early in the session. The market was consolidating Monday’s strong gains and when the US dollar came under pressure, more speculative buying emerged to support. London closed slightly lower. India coffee production for the 2009/10 season is expected to reached 300,000 tonnes, up 14% from last year. India is expected to export all but 90,000 tonnes. Open interest on the rally on Monday increased to 96,014 contracts, up 2,206 from the previous session which is a positive factor as open interest pulls higher from a 3 1/2 year low. Monthly US green coffee stocks for the end of August came in at 5.533 million bags, down 69,474 from the previous month. A continued drawdown in stocks in September is likely as end users source more exchange stocks for usage with Colombia and other Central America growths still holding higher than normal premiums to the cash market. ICE certified deliverable coffee stocks were up 4,077 bags to 3.378 million with 19,087 bags pending review.
