Arabica coffee futures settled firm Thursday as the strong technical performance attracted solid buying. The most active contract for march delivery closed with gains of 2.85 % or 4.70 cents to 167.15 cents a pound. Volume was significantly higher with 68,937 lots, including 22,625 switches. Coffee prices have been recovering the last two weeks after hitting a 1-1/2 year low at 142.05 on January 11. Indications of a smaller Brazil’s 23 crop have been circulating amid traders supporting the market’s recovery. This week, a report released by Volcafe, projected the Arabica production at 40.5 m bags, down from 49.8 m previously forecasted in June 2022. The increase in certificate stocks that has been putting pressure on the prices appears to have a lower the rate of passing. Since January, of a total of 254,000 bags submitted for certification, only 90,000 (have passed while 164,000 (64%) have been rejected. Technically, the next objective for the March position is at 175. However, oscillators indicting over-bought conditions make the market vulnerable for a correction. Certified stocks increased 7,128 bags to 870,722. Pending decreased 15,531 to 93,574 bags. Grading today 15,531. Passed 7,128. Failed 8,403 bags.
The Robusta terminal builds on recent gains with the speculative community driving levels into residual origin selling resting in May23. This is naturally drawing support into the march/May spread as specs buy into March whilst origin focus is may, forming baseline support at $30 premium. Technically the market remains dynamic to the upside as resistance at nearby averages has now turned support ($1933 basis March23), whilst stochastic still push higher in neutral territory. Indicators would suggest we should expect further upside potential with next key resistance resting at $2043.
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