Conab Increases Brazilian Coffee Estimate!
Coffee futures came under pressure Monday as traders reacted to a rise in the estimate for the 2007-08 Brazilian Coffee crop. The report by Brazil's National Commodity Supply Corp., or Conab, issued after the close of trading on Friday estimated the Brazilian Coffee crop at 32.6 million 60 kg bags – up a half million bags from the April estimate. However, Brazilian Coffee exports were expected to fall to 25 million bags, down from 28 million bags in 2006. Coffee prices saw further pressure from trading in London, where the Robusta contract fell as traders looked at the prospects for this year’s Vietnamese harvest. The world’s largest Robusta Coffee producer is expected to produce a larger-than-expected crop, with some estimates calling for a harvest of over 1 million tons versus this year’s 930,000 tons. Large speculators continue to hold a net-long position in Coffee, with the most recent Commitment of Traders report showing large non-commercial traders net-long 25,843 contracts as of August 21st. This sets up the possibility for some fresh long liquidation selling should near-term support fail this week.
Looking at the daily chart for December Coffee, we notice prices holding below both the 20- and 50-day moving averages. The 14-day RSI has turned neutral, with a current reading of 44.80. Major support is now seen near the 115.00 level, with the next support point not found until the 113.00 area. Resistance is seen near the 50-day moving average currently in the 118.25 area. In early electronic trade, December Coffee is trading at 117.30, up 0.10.
Mike Zarembski, Senior Commodity Analyst
