Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Coffee Update: Caffeine-Charge Your Portfolio Before 2019 Rings Out

uk.investing.com/analysis/coffee-update-caffeinecharge-your-portfolio-before-2019-rings-out-200435077
Coffee Update: Caffeine-Charge Your Portfolio Before 2019 Rings Out
By Barani Krishnan/Investing.com   |  Dec 06, 2019 08:59
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Dunkin runs on it; it’s been touted as the elixir of life; and now coffee may just be the caffeine booster your flagging portfolio needs before 2019 comes to an end.

A crunch in Brazilian output and sizzling chart action have given New York-traded arabica coffee a gain of more than 22% on the year, crowning it as the king of “softs”—in the commodities bucket that includes cocoa, sugar and orange juice.

Arabica is the second-best performing non-energy commodity for 2019, after nickel, which is up nearly 25% on the year.

No Slowdown In Momentum As Year-End Approaches

And with just over three weeks left to the year, it isn’t exhibiting any slowdown in momentum.

Coffee Weekly Chart - Powered by TradingView
Coffee Weekly Chart - Powered by TradingView

In Thursday’s session, the front-month arabica contract on ICE) Futures U.S.—March—hit 18-month highs of $1.244 per lb, thanks to funds, technical support and tightening crop situation in top producing country Brazil.

Analysts who track the beverage- and confection-based raw material believe it may offer flagging commodity portfolios some chance of redemption if their investors buy in before 2019 closes out.

Arabica Rally Driven By Production Deficit And Increasing Demand

Says Eric Scoles, commodities strategist at RJO Futures in Chicago:

“The arabica rally is likely to continue as the supply and demand dynamic continues to drive this market higher.”

“The many bullish fundamentals we’ve been tracking have been coming into play. From production deficit to increasing demand, this move is strongly supported as supplies grow tighter.”

It wasn’t always like this for arabica. The last time it rallied more in a year was back in 2014, when it rose almost 51%.

This time, arabica’s performance is remarkable for another reason: Just early in the second quarter, prices were crashing. The market reached 14-½ year lows of 86.35 cents per lb in April, after a bumper 2018/19 Brazilian crop.

Brazilian Drought Has Severely Undercut Current Arabica Crop

Now, conditions for Brazil’s 2019/20 crop have totally changed, says Miami-based Coex Coffee International, which gathers ground-level intelligence on coffee markets, including details on quality control, logistics and bean purchases, from suppliers across North and South America, Europe, Africa, and Asia.

Coex Coffee reported on Wednesday that due to severe drought, Brazil’s current arabica crop will be closer to 54-55 million bags, well below the 58 million bags forecast posted by the U.S. Department of Agriculture.

Says Mike Seery, who runs Seery Futures, a Plainfield, Illinois-based commodities risk consultancy:

“There are major concerns in key coffee-growing regions of Brazil about a lack of rain. I have witnessed this before and the market will explode to the upside if this continues.”
“But with such action, volatility will also increase substantially. All you have to do is look at the 2014 chart, as that was the last big drought this commodity has experienced.”

Arabica’s Chart Structure Improving On Daily Basis Too

Seery says he isn’t involved in arabica yet, but is monitoring it closely.

He adds:

“I’m certainly not recommending any type of bearish position as that would be counter-trend trading.”

“The chart structure is starting to improve on a daily basis and the monetary risk for entry is also being reduced.”

Investing.com’s Daily Technical Outlook for March arabica has a “Strong Buy” recommendation for March arabica, projecting a top-end resistance of $1.247. Thursday’s 18-month peak of $1.244 has basically achieved that target, leaving arabica trading at well above the 200-day moving average of 98.83 cents.

Funds Rapidly Swinging From Short To Long

But arabica has also seen greater times than now. The highest price over the past 15 years was $3.063, recorded back in May 2011. And in 2010, the commodity finished the year up 77%.

Scoles of RJO Futures, however, says what excites him most about arabica now is the rapid turnover rate in shorts to long.

He adds:

“The multi-week rally has been heavily fueled by massive short covering. Fund traders have not only covered their shorts but are now becoming buyers, which suggests this could become not just a rally but a full-blown bull market.”
Coffee Update: Caffeine-Charge Your Portfolio Before 2019 Rings Out
 

Related Articles

Coffee Update: Caffeine-Charge Your Portfolio Before 2019 Rings Out

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email