Coffee is one of the few physical commodities that has not benefited from the overall bull commodity market. Even the usual winter “freeze scare” rally hasn’t materialized this year. “A lot of people are trying to pick a bottom,” says Robert Shaw, a futures broker at Man Financial Inc. “But with all the physical commodities going down, I wouldn’t recommend it.” He adds coffee could be on its way to new lows in July and picks 90¢ per pound as a target, “Sell at $1.02,” he cautions.
“Conditions have been ideal for harvest and no threat of freeze,” notes Boyd Cruel, senior softs analyst at Alaron Futures and Options. Freeze season runs through the end of July, but the mild conditions have been limiting the upside potential and the funds are net short. “The coffee market can be pretty volatile, but we need something weather related for that,” he says, adding that in the event of a freeze threat, there could be a short-covering rally of up to 600 points (6¢). During July, he expects to take out the 95¢ low of September 2005 and then hit a high of $1.02 on a correction.
