After two weeks of extraordinarily strong trading that pushed up the prices of coffee futures by over 20 percent, coffee finally reversed course this morning. The benchmark Coffee C Arabica futures for September delivery declined .8 cents to $1.60 per pound, the first decrease in the 3 trading sessions according to Bloomberg.
Trading remains somewhat volatile on Tuesday, with prices swinging between $1.58 and $1.62 per pound of Arabica beans, and looked to end down a tenth of a percent.
A succession of fears about depleted stocks and possible supply shocks sustained coffee’s momentum over previous sessions, so it isn’t surprising that some pessimism about the price level set in today. Goldman Sachs said that production in Brazil should increase in the next year, stating that they “expect the market to remain focused on the Brazilian harvest that started in May and will peak in July/August.”
However, the bank’s research note did not take into account any possible effects from the catastrophic flooding currently afflicting the north-eastern region of the country.
Last week, similarly disastrous rains in Uganda pushed prices higher, as the East African nation announced it would have significant difficulties harvesting, drying and transporting its beans. The International Coffee organization’s projections for demand, on the other hand, show steadily increasing coffee consumption in most major markets.
Risk Disclosure
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.
