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The more positive technical action and the outlook for a tightening supply of coffee on the cash market in the months just ahead helped to support solid gains in coffee yesterday and suggests a near-term uptrend in prices. Outside market forces have been a negative force recently and if financial markets settle down and currencies stabilize a bit, coffee seems to be in a position to see at least a bounce just ahead. May coffee closed moderately higher on the session yesterday as the push under Tuesday’s lows failed to attract new buying interest and the market saw a strong recovery off of the lows. The financial markets calmed down late in the session and the weakness in the US dollar off of the early rally helped support renewed buying interest in coffee from speculators. It was the highest close for May coffee since February 3rd. Nearby futures led the rally with March gaining on other contracts. While the market has been in a downtrend, open interest has pushed to the highest level since June. Coffee exports from Mexico in January reached 259,351 bags (up 12.5%) which pushed cumulative exports for the 2009/10 season to 664,943 bags, up 16% from year-ago levels. El Salvador exports for the season have reached 253,419 bags, down 5%. There is still no word on cold weather damage from Mexico. Costa Rica has cut their production forecast for the third month in a row due to poor weather. Colombia coffee is still trading near $2.05 and at a large premium to the New York futures ($1.34). Daily ICE certified deliverable coffee stocks were down 3,408 bags to 2.902 million with 11,576 bags pending review. The market seems to have the fundamentals to turn up at anytime and firm premiums of futures over cash should help provide some support.
TODAY’S GUIDANCE: May coffee buying support is in the 132.45-131.95 zone with 137.35 and 139.55 as initial resistance.
