Morning Futures Roundup

Too Much Coffee Causing Jitters for Bulls

   Fundamentals
Arabica Coffee futures have turned cold lately, with prices falling nearly 20-cents per pound in just 3-trading sessions last week. Increased supplies from Colombia, high and rising exchange inventories, and a good start to next year's crop, were cited as some of the key factors behind the recent price slide. Production out of Colombia, the second largest Coffee producer in South America totaled 519,000 bags in September, is up 13% from last year's totals. ICE Exchange warehouse Coffee stocks continue to grow; now totaling just over 2.2-million 60-kg bags.

A change to weather forecasts, which are now calling for rainfall in the Coffee producing regions of Brazil, could provide a good start to next-season crop ahead of the important flowering period for the Coffee trees. Some producer selling was evident last week and may have been the catalyst for the steep sell-off, as sell-stops were triggered as technical support points gave way. Large speculators are holding a small net-short position, according to the most recent Commitment of Traders report, and we may see fresh selling emerge if recent lows near 156.50 do not hold.

   Technical Notes
Looking at the daily chart for December Coffee, we notice renewed selling occurring earlier this week after a feeble attempt to rally-off recent lows failed on Monday. Prices are now well below both the 20 and 200-day moving averages and momentum, as measured by the 14-day RSI, has turned weak with a current reading of 39.19.

There appears to be some support seen around the 160.00 area but stronger support does not appear until the September 6th lows of 156.55. Resistance comes in at the 20-day moving average, currently near the 172.00 price level.

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About Mike Zarembski

Born in the grain pits of the Mid-America Commodity Exchange (MidAm) in the early 1990s, Mike's futures career soon shifted to the offices of TD Waterhouse in 1999, followed by Xpresstrade in 2002 and eventually optionsXpress in 2007.