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With a little help from the dollar and higher metals and other commodity markets coffee could see increased buying support over the near-term. The market seems to have absorbed the outlook for higher production ahead from Colombia and Brazil in 2010 and the weak tone for the US dollar is a force which could continue to support. The 2009 Brazil harvest weather was poor with too much rain and the trees are now going through the flowering stage and conditions seem favorable so far. Too much rain recently in Vietnam has provided some underlying support but the region is drying out and harvest is just starting in some areas but will not peak until later in November. Vietnam is the world’s second largest coffee producer (mostly Robusta traded in London) and traders expect a crop near 19 million bags from 19.5 million last year. December coffee closed slightly lower on the session yesterday but well off of the early highs. The early rally was supported by the weaker US dollar but commercial sellers turned more active on the rally and December fell 220 points from the highs into the close. The market pushed to the highest level since September 24th before running into selling pressure above 131.50 basis the December futures. Traders are waiting for any news from Southeast Asia on crop difficulties over the typhoons of recent days, production prospects for next year’s Brazil crop and production from Colombia for their new crop season with harvest picking up steam. Daily ICE certified deliverable coffee stocks were down 5,594 bags to 3.347 million with 19,881 bags pending review.
TODAY’S GUIDANCE: With a positive tilt to outside markets, December coffee seems to be in a position to attract new speculative buying interest and the market has already absorbed significant commercial selling interest in recent weeks.
