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A tightening supply of higher quality coffee in Colombia and to some extent Brazil has helped support increased end user buying in coffee in the past week. A firm dollar and weakness in gold and other commodity markets helped to pressure futures overnight. The USDA attache in Brazil pegged the 2009/10 crop at 43.5 million bags, unchanged from the previous estimate. Exports, however, are pegged at 27 million bags, down 14% from last year, and ending stocks are expected at 2.49 million bags, down 2.15 million. This tighter supply from key export ring countries should help support the market into next year. Colombia’s production is well below expectations, and this factor should help support better demand for Central American coffee. March coffee advanced yesterday into the considerable resistance formed just under the late October and early November highs. The market made another new high for the day after mid-morning, based on spec buying that was tied to outside markets. Those outside factors included a lower dollar, higher crude oil and a new record high in gold. However, gold and crude retreated from their early highs as the dollar trimmed its losses, and this generated profit taking in the coffee market. The Vietnam harvest is in full swing, and this may keep a lid on London futures, but coffee dealers reported that Indonesian cash market premiums are at their highest level in over a year, which is somewhat constructive. Daily ICE certified deliverable coffee stocks were down 3,732 bags to 3.174 million with 76,101 bags pending review.
TODAY’S GUIDANCE: Traders remain concerned that the Brazil’s 2010/11 crop will be a bumper one, but it may be too early to trade extra supply that far in the future. Still, the market will remain influenced by Brazilian weather developments for the development of this crop. Outside markets appear very influential. Buying support for March coffee comes in at 138.35 with 141.60 as resistance. The market needs a close over 141.60 to expect a resumption of the uptrend and to have 152.10 as next upside target.
