ICE Coffee Futures Plunge Lower
Arabica coffee prices moved sharply lower today motivated by speculative selling that triggered large stop orders, a weakening of the Brazilian Real that prompted exporter selling, and an overall deterioration of the technical picture. The active contract for July delivery fell 5.55 cents to settle at 137.55 per pound. Circuit breakers at the ICE were triggered for “C” futures as a cascading stop situation pushed prices rapidly lower. A cascading stop is characterized by the accumulation of stop orders that trigger other stop orders, which hit yet more stop orders and so on; a condition that creates a lack of liquidity and a price vacuum. Origin selling was also noted as weather in Brazil coffee regions remains optimum while the harvesting period looms and the Real weakened against the Dollar. Technically, near term support is seen at the April 15th 133.55 low basis July. London: Robusta recorded an active opening sequence with the board uncovering a batch of sell stops below 2060 in July which produced good opening volume. The action appeared to take the market unawares with buying building into the market after the initial move lower. Turnover was good with the action reflected in the May discount widening back towards $30 before the market reverted to a tight operating range into the balance of the morning. Prices came under increasing pressure into the second part of the session as the board rolled over into another wave of selling which followed weakness taking the board below a second trigger of 2050 looking towards the 2000 marker. Flat price selling intensified with the weakness taking out resting price fix buying. Prices found it difficult to find a level working around the 2020 pivot level having turned all the main indicators lower with today’s performance. The question from today will be to what degree we have released “Managed Money” longs after such a performance. The working number as of the last COT report at 17,033 was considered higher than expected. The board was not in a position to recover the lost ground edging nearer to the 2000 bench mark into the closing sequence of the day totally turning indicators and pulling in intraday shorts.
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By Isis Almeida April 23 (Bloomberg) -- Goldman Sachs Group Inc. lowered its price forecasts for arabica coffee futures in New York, citing an improving production outlook in leading grower Brazil. Prices will be at $1.45 a pound in three, six and 12 months, the bank said in a report e-mailed today. That is down from previous forecasts of $1.55 a pound, $1.65 a pound and $1.75 a pound, respectively, it said. Arabica futures for delivery in July fell 0.6 percent to $1.4225 a pound by 9:14 a.m. on the ICE Futures U.S. exchange in New York. Brazil will harvest 47 million to 50.2 million bags of coffee this year, Conab, the government’s crop-forecasting agency, estimates. That is down from 50.8 million bags a year earlier and may be a record for a year in which trees enter the lower-yielding half of a two-year cycle. “Although 2013-14 is the low-yielding production year in Brazil’s biennial cycle, favorable rains in March point to an even larger off-year crop, already forecast to reach record volumes,” Damien Courvalin, an analyst at Goldman Sachs in New York, wrote in the report. “The arabica market will likely only be in a modest deficit or even remain balanced in 2013-14.” The improved outlook for the crop in Brazil means supplies there will compensate for production losses caused by coffee leaf rust disease in Central America, he said. The epidemic is the worst case since the disease appeared in the region in 1976, according to the International Coffee Organization in London. Leftover Sales While further cuts to production estimates in Central America may “provide modest support to prices,” sales of leftover stockpiles from the last crop in Brazil may “weigh on prices in coming months,” according to Goldman Sachs. Brazilian growers sold 75 percent of the 2012-13 crop by March 31, down from 86 percent a year earlier, Gil Barabach, a market analyst at Safras & Mercado, estimates. The global sugar market is heading for a third year of surpluses in the 2013-14 season that starts in October in most countries, the bank said. Excess supplies will result from a large sugar cane crop in Brazil’s center south, the main growing region of the world’s top producer, and as growers continue to replant. “The increase in Brazil sugarcane crush will allow for both an increase in sugar and ethanol production,” Courvalin said. |
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