Sip Your Coffee While Waiting for the Next Big Move

January 26, 2018 8:46AM CST

The coffee market has been tied up in a relatively tight range the last eight weeks.  Values just under 120 and as high as 130 have left many bored with the market and others content with trading the range back and forth.  However, this is actually the time when many should be paying the most attention to coffee and perhaps the next biggest mover.  2017 was a difficult year for coffee prices as previous shortfalls in Robusta and questionable quality in parts of the Arabica regions left prices hovering near $2.00.  Most of last year was spent in a never ending downtrend that seems to have found a stable value around $1.20.  Now, the trade anxiously looks to the future and any possible catalysts that would give the price of coffee an excuse to run higher.   Currently, we are closely watching this seasons Arabica production which may fall short due to the quality of beans being produced.  Production at this point is forecast around 38 to 39 million bags, this down from the 16/17 output of 45.6 million bags.  Should these numbers hold or project lower it could be enough to push prices back into the 130 to 140 range.  Furthermore, the US dollar will also be key to how we value coffee.   If the US dollar builds significant strength in 2018 that could easily weigh on prices and mitigate any large price changes.   I would argue that using inexpensive Call options to take advantage of any move to 130 to 135 would be worthwhile.  

Coffee Mar '18 Daily Chart


RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgement at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.

Distribution in some jurisdictions may be prohibited or restricted by law. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction with registration, the market commentary in this communication should not be considered a solicitation.