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A jump in many commodity markets and weakness in the US dollar leaves a positive tilt to outside markets this morning and is likely to help support increased interest in coffee. Tightening supply into the first half of 2010 and expectations for improving world consumption ahead should help provide underlying support. In addition, the technical action remains positive. March coffee closed slightly higher on the session yesterday finding some light support from speculative buyers. Fund traders seemed to be on the sidelines in coffee but were active in other markets like sugar and corn. Ideas that the situation in the cash market will remain relatively tight into early next year and that the production outlook into the middle of next year remains highly uncertain helped to provide some support. In addition, news that NOAA sees the El Nino lasting into the spring was seen as positive. Coffee traders remain concerned with the impact of El Nino for production in Indonesia and from South America. Colombia rainfall in the past several months and in November was below normal in some key areas of the country and the drier and warmer than normal conditions have been seen as a good breeding ground for broca worms, according to the National Coffee Research center. Rainfall has also been below normal so far in December as Colombia is trying to recover from this year’s poor production of near 8.3 million bags as compared with 11-12.5 million which would be considered normal. Too much rain in Brazil has been a concern for next years crop as the key producing areas in Brazil have not seen a dry spell to spark even flowering since the rains began in September. Daily ICE certified deliverable coffee stocks were up 693 bags to 3.169 million with 33,046 bags pending review.
TODAY’S GUIDANCE: The market looks set to push higher into early next year. Light support for March coffee comes in at 142.30 with better support at 140.55. Use 152.10 and 153.65 as next upside objectives.
