Coffee Supply Issues

After two positive trading days, coffee futures pulled back. The trade has now entered an area that will be key over the next few sessions. The market had traded and closed above the 50-day moving average – leading traders to believe December prices were headed back over 100. Tuesday, that was a different story. The futures contract attempted to move above 101.80 but ended the day lower.

 Although traders may be dealing with a global production deficit, prices haven’t fully shown this. After the recent rain in a key growing region, Brazil, it appears the forecast in the near-term looks dry.

Also, according to COT data, the market is heavy on the short side – which could prove to give buyers good opportunities on pullbacks. For now, traders could look at buying calls in the March contract to have some staying power in the trade as the coffee market deals with volatility and uncertainty in production levels.

If you are interested in discussing the soft commodities further contact pmooses@rjofutures.com