Coffee Futures Resurgence with Brazil Drought

From out of nowhere, and without warning it seems, coffee futures had an “about-face” after the nine-month low made on Friday, January 2nd, and have now signaled a possible uptrend. Coffee futures at New York’s Commodity Exchange Center are currently down 350 points from yesterday’s close, only after reaching a five-week high in the March contract earlier in the trading session.

According to a respected meteorologist in Brazil’s capital city of Sao Paulo, their coffee growing regions are forecasted to receive only one-half the normal amount of rain for the remainder of this month, and all of February. Brazil is the world’s premier grower and exporter of coffee, but the weather conditions there have created a roller-coaster ride for int’l coffee prices in the past few years.

Jeff Evans, a Senior Broker and Vice-President of the Managed Accounts Division for RMB Group in Chicago, shared his fundamental analysis insight regarding the current coffee futures situation by stating, Coffee (futures) is considered one of the top weather dependent futures markets.” Evans added, With the coffee market ending 2014 in a bear market, much inventory had been depleted. With drought forecasted, supplying world demand may be a challenge.”

Coffee futures trend is technically up as of today, reversing the bear-market outlook since October. Before jumping on-board, coffee futures needs to test their January 2nd low first – as I see it in my study.

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