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The coffee market remains in a solid uptrend and traders await any new news on the outlook for next summers Brazil crop size and/or the progress for the Vietnam harvest which is picking up steam. The technical action remains positive and the market has found support from outside markets as a surge in gold and a continued weak US dollar have prompted more and more investors into commodity markets. On October 2nd, open interest was at 98,996 contracts and is now at 125,359 contracts. Traders expect a solid recovery in production this coming year from Central American countries who have benefited from the huge premium of Colombia and other light arabica coffees over the futures market and have stepped up fertilizer and other inputs in the past season. Nicaragua producers will be keeping a close eye on the weather as a hurricane moves in to the country. Heavy rains just as the crop is ready to harvest could spark some problems. December coffee closed slightly lower on the session yesterday as the early rally failed to find new buyers and prices pushed lower. The sharp drop in the US dollar failed to attract new buying in coffee and weakness in other soft commodities may have helped limit the buying support as well. Profit-taking was noted late in the session as traders see the need for some consolidation after the surge higher on Monday. The lack of a quick recovery in production from Colombia and recent dryness in the region has added to the bullish tone. Colombia rainfall in October came in well below normal and this has added to concerns as the El Nino expands in the region. Daily ICE certified deliverable coffee stocks were down 59,177 bags to 3.214 million with 67,389 bags pending review.
TODAY’S GUIDANCE: Buying support for December coffee comes in at 139.15 and 137.70 with 145.40 and 150.15 as next upside targets.
