Coffee: Moderate Frost, Isolated Losses

The US economy continues to show signs of recovery, which reinforces the investors’ belief to put their money in that country stock market. The data for durable goods orders was well above expectations, and this along with the price recovery of real estate and the actual exchanges performances, all reflect a greater confidence from consumers.

The main commodities indexes suffered losses last week, impacted by the negative performance of grains and energy raw materials. In reality, only sugar, cattle and pork did not fall.

Coffee oscillated according to the weather prognosis and cold nights in Brazil, which brought a frost to the Parana State that causes “small/moderate” losses according to one of our faithful collaborators.

Although sad for the producers who suffered losses, the global market understood that the picture of production surplus vis-à-vis the consumption still prevails so the more bearish stance of prices should not change.

The highlight of the week was the great usage of certified stocks from LIFFE that in fifteen days fell almost 292 thousand bags, bringing the current inventory to its lowest level in almost 6 years at 1.638 million bags.

It is important to note that we should have a continuation of the utilization of these stocks for the next 3 to 4 weeks, when it is expected that a bigger volume should then flow from Vietnam, which has had a slower pace in terms of shipments recently.

With an expected crop around 27 million bags and internal stocks higher than it is used to carry at this time of the year, it seems reasonable to keep the opinion that the London market is a great opportunity for the Robusta producers to sell.

The commitment report of the CFTC shows that the origins are taking advantage to sell the rallies at the C, and at the same time the funds are liquidating their shorts.

With a more intense cold weather and London’s rally not being sufficient to keep the gains seen recently I will maintain the opinion that the market will not leave the price interval of 110 to 130 cents per pound for the next few months.