RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

More and more coffee production and supplies continue to weigh heavily on the price of July coffee. An extremely volatile week last week had July coffee prices rallying to challenge the May 125 level highs, only to promptly retreat to the 118 level. The Hightower Group has reported that “Brazil producers are preparing for a record harvest ahead”. To add more pressure to July coffee prices, Columbia is also seeing outputs larger than expected.

Last week’s failure to break above the 126 resistance level (and subsequent selloff) is bearish. The large supply outlook is also bearish. Let’s keep in mind that coffee prices have been trending down consistently for the last two years, and there is no reason at this point to believe a reversal is in place. Traders should position themselves for a long term downward continuation using long put options that allow exposure and leverage, while managing risk effectively. In addition, buy equal-numbered quantities of options so that you can remove half of the position when the option value doubles (thus eliminating the premium risk).

Coffee Jul ’18 Daily Chart

Coffee Jul '18 Daily Chart

Adam Tuiaana

Adam grew up in Chicago and was always fascinated by the fast-paced action found in the futures market hub there. He began participating in the financial markets by trading stocks in 1997 and began his career as a trading consultant with RJO Futures in March of 2009. At RJO, he specializes in risk management and disciplined trading plans, and is focused on educating clients with one-on-one consulting and training. Adam believes the best approach to trading is to take a measured and objective approach and let the markets guide your decisions.