Linked In
News In

You are viewing your 1 complimentary article.

Register now to receive full access.

Already registered?

Login | Join us now

Coffee futures - does the rally have legs?

Twitter Linkedin eCard

Arabica coffee futures continue their strong rally - with the front May contract adding 2.7% on Thursday, taking total gains for the month to 15.5%.

Production concerns in key exporting countries have continued to develop.

Prices, now at their highest levels since October, have been supported by news of dryness in both Colombia and Brazil, the top two producers of the bean.

'Dryness in Vietnam too'

In Espirito Santo, Brazil's key robusta coffee-producing state, the crop has suffered from an extended drought that has severely impacted projected yields for the 2016-17 harvest.

Rabobank senior commodity analyst Carlos Mera flagged a 24%, or 3.9m-bag, drop year on year in Brazilian robusta output after conducting a crop tour through key states earlier this year.

Compounding this issue, Mr Mera notes that "we are starting to see dryness in key Vietnamese robusta areas" which will keep robusta prices supported in the short-term. (Vietnam is the top robusta-producing country)

On Thursday, London robusta coffee futures rallied, too, closing up 2.3% at $1,459 a tonne for May delivery.

Technical help

Trading technicians will also be buoyed by the New York arabica May contract breaking out of its recent trading range.

Having spent the last six months in a well-defined downtrend, the May contract last Friday broke out through the top-side of this recent range, surging 3% during the day's trade.

The contract on Wednesday set another milestone when it closed above its 200-day moving average for the first time in 15 months.

And a supportive broader macro picture has also fuelled coffee's price revival.

With risk assets, from equities, oil and other soft commodities, all largely gaining ground on the back of US Federal Reserve chairman Janet Yellen's more dovish assessment of the US economy and conservative outlook for interest rate rises.

The weaker dollar has increased the competitiveness of dollar-denominated commodities in export channels.

Where to from here?

Ms Yellen's announcement overnight has certainly provided some bullish sentiment across commodity markets.

And, whilst fundamental news continue to flag production cuts, more gains for Arabica futures in the short-term cannot be ruled out.

By Nicholas Burke, coffee editor

Twitter Linkedin eCard
Related Stories

Morning markets: Soybean prices hold, even as China-US trade tensions grow

Still, what of rising soybean prices in China itself - where sugar import data show how import levies can affect trade? US wheat futures extend their recovery

Evening markets: Investors place pork, soybeans on front line of China-US trade war

Soybean futures underperform a lot, and lean hog futures a lot, after the US unveils plans for tariffs on $60bn of imports from China

Rabobank sees scope for coffee, sugar price recoveries - but downbeat on grains

Brazil mills have a big incentive to turn cane into ethanol rather than sugar, the bank says, while flagging potential for recovery in drought-hit US wheat

Brokerage forecasts for Friday's US Cattle on Feed report

The consensus estiamte is for a gain in the feedlot herd last month. But that disguises a wide range of forecasts for the placement number
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© 2017 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of AgriBriefing Ltd
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069