Arabica Coffee (KC, ICE [NYBOT]) in cents/pound
The arabica is a high quality coffee collected in Central America, East Africa and in Brazil (larger producer in the world of arabica).
The robusta is collected mainly in Asia and in Africa. The largest producer is Vietnam. This coffee is mainly used to make instant coffee.
American stocks decreased by 28% this year, whereas they reached 2,2 million bags last year.
However stocks could fall to 1,74 million bags in September and to 800 000 in March, according to experts.
The official stock of the LIFFE (robusta) passed in one year from 400 000 to 230 000 tonnes.
Why?
Because the two last harvests of arabica in Central America and Colombia (the second largest producer of arabica after Brazil) were bad, and last year the production of Brazil was damaged by excess rain. For the robusta, dryness hit Asia this year and Vietnam should produce 17,5 million tonnes this year vs. 18 million last year.
So the supply will decrease by 6% from 128 million tonnes last year to 120,6 this year, while the demand for arabica and robusta remain constant.
To sum up:
- Insufficient Supply for a constant demand
- Level of coffee stocks to low
- Fears of “coffee shortage” on the market
-->It explain why the coffee price is going up.
Also there is many hedge funds which speculates in the coffee market. These funds shorted massively the coffee, when an important actor of the market decided to ask for the physical delivery of all the July expiring contracts. Due to the supply shortage they were forced to repurchase their short positions at a high price to respect their engagements.
In a short-term coffee will be under 150 with 50/61,8% of Fibonacci retracements, with a support at 145 and 135 if it breaks the 145.
However coffee should be bullish again soon and reach the 175.
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