Coffee Prices Stabilize

Coffee futures have finally found some stability following their recent sell-off. On Friday, robusta coffee futures inched higher after plunging almost 3.5% over the week on technical selling pressures. They were recently up 0.3%.

Robusta coffee futures experienced the sell-off despite strong fundamentals as money managers adjusted their positions ahead of the contract expiration. However; this readjustment resulted in some bearish technicals and position liquidations followed.

While the bearish technicals sent futures lower, a news release on Friday returned traders’ focus to the tight market fundamentals. On Friday, the Vietnamese government said that the country will export an estimated 604,000 tons (10.1 million 60 kg bags) of coffee in the first four months of 2017, down 8.8% from a year ago. A drought in Vietnam, a major robusta grower, has reduced the volume robusta beans available for sale.

Also limiting the losses was the fact that coffee producers were less willing to sell their robusta supplies due to the lower prices. This comes after dealers commented on the higher availability of beans just before robusta went through its sell-off. Also, money managers remained net long on coffee even though fund liquidating drove the sell-off. This indicates that long-term, they still expect prices to appreciate.

Meanwhile, data released by the International Coffee Organization (ICO) last Friday showed that global coffee exports fell 2% in March year-over-year. However; for the first six months of the 2016/17 season, which began on October 1, coffee exports were up 4.8% at 60.08 million bags.

Arabica coffee futures were also higher on Monday. Arabica coffee futures remained pressured by the expectations for an upcoming bumper crop, following recent higher-yield years. But, on Monday the coffee bean was getting a lift from some bullish technicals. Futures were recently up 1.1% at $1.380.

Leia Toovey


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