Softs

Large Brazilian Crop and Weak Demand for Coffee

Posted 05/06/2020 11:29AM CTAdam Tuiaana

While major populations prepare to come back to work, the current weak demand and forecasted questionable demand continue to add pressure to July coffee prices. In addition, there has been news of an extremely large crop forecasted from the largest producer of coffee, Brazil. Our friends at The Hightower Group have reported that “coffee has been pressured by a potentially record high Brazilian crop, and sluggish producer currencies as it has been as it has been unable to lift decisively clear off of its 2020 lows.”

Fresh bullish news in the way of recovering demand will be needed to support coffee prices in the long term, and we should continue to see some volatile swings the near term while we continue to wait out any potential vaccine for COVID-19.

From a technical perspective, traders may note that there is a potential head and shoulder reversal pattern to the downside (see daily chart attached). While these massive swings in coffee prices continue, with questionable demand on the horizon, many traders may benefit from staying in cash for the time being.

Coffee Jul ’20 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.