After peaking at $1.33 per lb. in mid December, coffee turned lower and the sell-off appears to be accelerating. “We have had a great deal of producer selling,” says James Cordier, head trader at Liberty Trading Group. He says this was an on year for Brazil and Vietnam and that larger than expected production is pushing prices down. Cordier doesn’t expect the high to be challenged, but says coffee will stabilize around $1.10 to $1.15 and rebound to between $1.1750 and $1.2250. “The consumption is there,” he adds.
Robert C. Shaw, senior futures specialist at Man Financial Inc. sees more steam in the sell-off. “We’ve come down from $1.32 to $1.12 and I don’t see any reason that we wouldn’t test the low of $1.04.”
Darin K. Newsom, senior analyst for DTN, notes that the May/July spread is trending lower, indicating bearishness. “What normally
happens then is that the market returns to fundamentals,” and non commercials will give up on their positions. He says that support failed at $1.1430 and if commercial buying can’t hold the $1.0750 support level, the market could test the July 2006 low of $1.0420.