The coffee market has given us some great volatility this week.  However, I would argue the trade is not completely convinced that the go ahead has been given to drive this market back to levels not seen since the end of 2017.  I believe the trade should start taking into consideration the idea that coffee has attempted multiple times to make new lows and failed.  In addition, with news that most of the 2017 Arabica surplus has been reflected into the current futures price, it makes one think that higher prices are just around the corner.  The following chart reflects the markets inability to make lower lows after a long year of consistently lower prices.  I believe that this is due to the idea that global demand for coffee does not look to drop off in 2018.  Furthermore, as we consider that analysts are also pondering the idea of lower crop yields in 2018 this could only help push the market back into the 125 to 135 price range.  Should the market press and close above 12600 basis March this may be the catalyst to finally give the trade confidence to hold onto long positions in this market. 

Coffee May ’18 Daily Chart


Hector Galvan