March Coffee has seen quite the selloff since the November 8th high of 179.55. Let’s take a look at the fundamentals for getting bullish at this point. The weather in Vietnam coupled with the crop size in Brazil in 2017 is keeping the shorts at bay, at least for the next few weeks. Obviously you have the holidays fast approaching, and traders might look for more weather certainty in Vietnam before placing their bets. Brazil and Vietnam account for over half of the world’s coffee, with Brazil accounting for 36% alone. Their harvest is in May, and with an El Nino year you could see some weather issues come into play in the coming months. The demand seems to be there. Within the past 10 years American Millennials (US is the largest user of coffee) have been accounting for the latest surge in use. I think going into 2017 demand will continue to increase, so our focus should be on supply more than anything.
From a technical standpoint March coffee is down almost 40 cents from the highs in November. We’ve found some short-term support at 140, and have at least for the time being closed above the uptrend since February. We’ve also seen support from two spikes up around 140 back in March and May of 2016. If the market can find a close above 146.58, which is the 200-day M/A, you can really start to make a case to be bullish this market. We could see the market topping out in the 154-157 range, only because of where the 50 and 100-day are at respectively. There are a number of strategies we are implementing, and for more details on how to play coffee don’t hesitate to call me directly at the desk at 312-373-5383.
Market Strategist II
Josh began his career in May of 2013 after graduating from Purdue University, West Lafayette. He received a degree in Agricultural Economics, with a Certificate in Entrepreneurship. He started at Paragon Investments in Kansas, the heart of wheat country. While working there he developed long term relationships with corn, soybean, and wheat producers, speaking with them on a weekly basis. His goal was to market their physical production more effectively through tracking basis, as well as hedge their exposure in the grain and cattle markets through a variety of futures and option strategies. He then moved to Florida to work for PFL Petroleum, a physical biofuels brokerage, and gained significant exposure to OTC and physical energy markets. Trading has been a passion from day one of his career. In his free time he stays active in downtown Chicago, attends sporting events, and holds an FAA Private Pilot’s License and flies Cirrus and Cessna aircraft regularly.