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December coffee pulled back to support near 133.00 and bounced yesterday which may be seen as a short-term positive development. The market has been pressured with the 5-day bounce in the US dollar which setback overnight and might help to provide some support today. December coffee closed moderately lower on the session yesterday as another solid gain in the US dollar and another sharp break in global equity markets helped to pressure. Lower interest rates and speculative long liquidation selling were seen as other reasons for the sell-off with December coffee moving to the lowest level since October 6th. Commercial sellers and buyers appeared to be on the sidelines but traders are nervous that a continued slide in world equity markets could be seen as reason to suspect less than robust world demand and could also spark more selling from producers. Keep in mind; some coffee from Brazil may stay off of the market this year after government put programs which will have producers selling the coffee to the government and then the government moving the coffee into storage. Traders await results of the flowering period in Brazil as agronomist can get a better feel for the potential for next year’s production depending on the success or failure of trees to flower during this period. Current estimates seem to range from 47-55 million bags and this range will narrow considerably in the months just ahead. Daily ICE certified deliverable coffee stocks were down 5,893 bags to 3.292 million with 10,075 bags pending review. Open interest fell slightly to 122,873 contracts but still up from 98,248 on October 1st.
TODAY’S GUIDANCE: Chart support for December coffee is near 133.00 with uptrend channel support today at 132.10. Resistance comes in at 137.70 and 139.15.
