Expert Warns “Not So Fast” with Coffee Futures Rally

Coffee futures trend has turned up one week ago today, but one expert is warning about “jumping the gun” on this market because of the Brazilian dryness as the leading cause for this rally (reported here a couple weeks ago). Coffee futures are up 30 points today trading at $1.3465 per pound at the Intercontinental Exchange.

Although weather conditions in Brazil’s main coffee producing region are reportedly worsening with dryness, the El Nino storm system has a very high percentage chance to change everything with late-year moisture. Separate of weather conditions, a major investment bank has publicly stated their positive view for the Brazilian coffee crop including the possibility of a record yield for that country.

Nicholas Medina, a futures and options specialist for Capital Trading Group in Chicago, shares his view regarding the fundamental situation of the coffee futures markets by stating, Although the current dryness and Brazil’s Real initially boosted coffee futures, the trade may factor in El Nino bringing in too much rain too late in the growing season.” Medina added,There is good reason for coffee (futures) to be rallying with uncertainty so high.”

Coffee futures trend is up as of recent, but there have been no significant pull-backs since the $1.15 lows late last month. Coffee futures is one of the most volatile markets traded and buying on pull-backs would indeed be recommended.

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