Altico Trading

Good Morning!! Coffee prices were higher overnight, despite lower risk appetites due to pressure from outside markets like crude oil and equities. There are several supply-side developments that could keep prices fairly well supported early this week. Brazil's Arabica production has been strong this season, but this is the "on year" of their 2-year crop cycle. Their crop next season could fall by 6 million bags or more from this year, and that estimate was made before the impact of mostly dry weather over the past few months and several frost scares were factored-in. Colombia has made great strides in recovering from their production problems in recent years, but their monthly output totals have started to plateau, and they have may reached a near-term production ceiling. This in turn puts additional importance on the upcoming Vietnamese crop, which has seen near-drought conditions for much of 2016 and now may not see late-season benefit of additional precipitation from a La Nina weather event, as that may not begin this year. Indonesia is seeing some above normal dry season rains that could be unfavorable to the maturing crop and delay harvest. December coffee will find near-term support at 150.70 and then 148.45, with resistance is at 155.00. A move above the mid-July high would leave 165.20 as a longer-term upside target.