Morning Coffee: Smaller Than Normal "on-year" Crop to Support More Up
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Coffee prices continue to see consolidation but the market has lifted well clear of the early January low in spite of negative global risk sentiment. With the longer-term supply outlook remaining bullish, coffee can extend this recovery move. Ongoing production issues in Brazil and Colombia have continued to underpin coffee prices early this year, as those 2 nations combined account for more than half of the world's total Arabica output. A La Nina weather event is widely expected to remain in place through the end of March which could lead to drier than normal conditions to Brazilian growing areas and heavier than normal rainfall to Colombian growing areas, both of which will have a negative impact on upcoming coffee production.
In addition, a continued drawdown in warehouse coffee supplies shows evidence that a global shortage of shipping containers has obstructed coffee exports. ICE exchange coffee stocks fell by 13,905 bags, and with 4 session left in January are on-course for a third monthly decline of 200,000 bags or larger over the past 4 months. US green coffee stocks at the end of December reached their lowest levels since June with a fourth monthly decline in a row.
TODAY'S MARKET IDEAS
The supply outlook remains supportive. Near-term pullbacks should still be seen as buying opportunities. Near-term support for March coffee is at 236.45 and 232.70, with 249.50 as resistance.
