Since late January, coffee had been on a rampage, shooting from $1.35 per pound past $1.70 in late February, and then falling out of bed and closing near $1.50 in early March. “It’s not just coffee,” says Robert J. Schroeder, futures and options specialist for MF Global. When Schroeder spoke with us on March 7, soybeans, corn, soymeal and bean oil were all limit down and sugar was a lot lower. “I don’t think it’s a trend reversal, it’s just profit taking in all the agriculturals,” he says, adding that the run up was too much, too soon, and Brazil’s revised larger coffee forecast didn’t help. He says support is at $1.40 and resistance is at $1.66 for April.
“If we look at softs as a package, all these contracts have done the same thing. It’s almost like we reached a crescendo at the end of February,” says Darin Newsom, senior analyst for DTN. He added that eight to 12 contacts hit record highs in the first week of March. “All the buy orders are in,” he says, and now the market has to back fill to find the next round of buy orders. “It’s been nothing but action packed. I have never seen this many markets cutting across this many sectors acting like this all at one time,” he says. In April, he expects May coffee to trade down to $1.4430 and rebound to $1.55 to $1.60.