Coffee Rust Effects on Latin America Ease -- Market Talk

  12:51 EDT - Coffee rust, a fungal disease known locally as roya, drove down production in Central

America, the Dominican Republic and Peru by 18% in the 2012-13 season, the International Coffee

Organization says, but by only 2% in the season which ended last month. "The damage from coffee leaf

rust is starting to plateau," says the ICO. But even if these growers recover this year, lower

Brazilian production due to a drought could spell trouble down the road. While supply-demand was

relatively balanced in 2013-14, lower production "will likely result in a global deficit next year."

ICE Dec arabica-coffee futures up 0.9% at $2.1990/lb.

World Weather - Coffee - 14/10/2014

By Andy Karst and Drew Lerner
Kansas City, October 14 (World Weather, Inc.) – No change in the hot, dry, weather outlook has occurred for Brazil through the weekend and any showers that evolve early next week will be too brief and light to allow any flowering or change in soil moisture. Scattered showers and thunderstorms will slowly develop and increase in the second half of next week and into the following weekend, but it remains unclear how significant the rain will be. Most likely it will be erratic offering greater rainfall to some areas than others.
The effects of Hurricane Gonzalo stayed mostly offshore from Puerto Rico as it moved to the northeast of the island overnight and serious damage to coffee did not appear likely.
BRAZIL
No measurable rainfall occurred in coffee areas Monday or early today. High temperatures were in the 30s Celsius across most coffee areas with a few readings in the upper 20s near the coast and in central Minas Gerais. No temperature in coffee areas was warmer than 38 and that occurred in northern and far northeastern Sao Paulo. Lows this morning were in the upper teens and lower 20s most often with a low of 26 in northern Sao Paulo and lows of 13 near northern Sul de Minas and interior southeastern Bahia. Hot temperatures will prevail over the coming week while rainfall is minimal. Daily highs will range in the 30s to near 40 degrees Celsius most often with one or two locations getting to 40 before the week is out. Most of the hottest conditions will not be in the heart of key coffee areas, but may impact portions of northern Sao Paulo and both western and northern Minas Gerais to possibly central Bahia. A few upper 20s will continue near the Atlantic Coast.
Low temperatures at night will be mostly in the teens and lower 20s, but a few readings of 11 to 12 may still occur tonight in the traditionally coolest locations.
The heat and dryness will more severely stress coffee trees already suffering from limited soil moisture. Recently flowered crops in the south will likely lose their blossoms without experiencing successful pollination and that will reduce the crop a little more.
Rainfall is possible early next week, but only as isolated to scattered showers and thunderstorms. Daily rain totals will range from 1 to 13 millimeters Monday into Wednesday with a locally greater amount possible. The precipitation will be welcome as relief from the previous ten days to two weeks of hot, dry, conditions. However, it will not be enough to induce a general change in crop conditions.
Rain prospects will be better in the latter part of next week and into the following weekend than they will be early to mid-week next week. World Weather, Inc. anticipates very little meaningful rainfall initially and its distribution may be somewhat similar to that of two weeks ago when a few areas received significant rain while many others did not.

COLOMBIA/VENEZUELA
Rain fell throughout northern Colombia and in a large part of central Colombia Monday. Amounts varied from light to locally heavy. Isolated and light showers occurred in southern Colombia and in western Venezuela. Regular rounds of showers will occur during the next week and most areas will receive multiple rounds of rain.

PERU
Isolated and light showers brought rain to a few locations in small parts of each coffee producing region Monday. Central to southern coffee producing areas will see a continuation of isolated and light showers through the next week. A few showers will develop from time-to-time in northern coffee locations with the precipitation light most often.

PUERTO RICO/DOMINICAN REPUBLIC/CUBA
Hurricane Gonzalo passed to the northeast of Puerto Rico overnight and most of the strong wind and heavy rain stayed offshore, sparing the coffee crop from serious damage. Gonzalo was moving to the north and away from the island this morning and is no longer a threat to coffee in the Greater Antilles.
Scattered showers will occur daily through the next week across the Greater Antilles and most areas will see rain on more than one occasion.

MEXICO/CENTRAL AMERICA
Scattered showers developed in Mexico Monday with light to moderate amounts occurring most often. Showers were more numerous in Central America where most areas from Nicaragua to Panama saw light to heavy rain and large parts of Guatemala and Honduras saw light to moderate rain.
Daily shower and thunderstorm activity will occur from southern Mexico through Central America through the next week to ten days as a series of slow-moving low pressure systems traverse the region. The active pattern is abnormal for this time of year and will interrupt farming operations and coffee harvesting.

VIETNAM
The Central Highlands were mostly dry again Monday with some rain reported near the coast. Most of the organized shower activity during the next week will occur near the coast while most coffee areas see an occasional round of light showers with drying occurring most often.

EAST-CENTRAL AFRICA (Ethiopia, Uganda, Kenya and Tanzania)
Scattered showers developed from southwestern Kenya into central and northern Uganda Monday with western Ethiopia also seeing scattered shower activity. Most of the resulting rain was light. Light rain also fell on a part of southern Uganda with mostly dry conditions occurring elsewhere.
Showers and thunderstorms will occur regularly from south-central Kenya northeastern Tanzania into western Ethiopia and Uganda’s crop regions through the next week to ten days. The precipitation will be light to moderate and locally heavy. The Pare region of Tanzania will see dry weather most often with some light showers occurring late this week into this weekend.

IVORY COAST/GHANA/NIGERIA/CAMEROON
Scattered showers and thunderstorms occurred across the region Monday. Amounts varied from light to locally heavy. Daily rounds of scattered showers and thunderstorms will continue through the next week and most areas will receive multiple rounds of rain.

INDIA
Light rain was scattered across southern India’s coffee producing region Monday. Rain will fall regularly through the next week which will help supplement irrigation and continue favorable conditions for coffee development.

INDONESIA
Rain increased in central and western Java Monday where amounts varied from 1 to 14 millimeters. A part of central Sumatra received 10 millimeters of rain with 1 to 2 millimeters reported in a couple of northern locations.
Regular rounds of showers and thunderstorms will occur during the next week in most of Sumatra with some eastern locations on southern parts of the island seeing little significant rain. Light showers will occur regularly in parts of Java while northern areas driest. Central Sulawesi will see a few light showers occasionally with little rain expected in Timor.

Arabica Coffee Ticks Higher; Orange Juice Rebounds

  NEW YORK - Arabica-coffee futures ticked higher Tuesday as erratic rainfall in Brazil's growing

areas continued to fuel concerns over the size of the next harvest after dry weather crimped this

year's production.

Arabica for December on ICE Futures U.S. was up 1.3% at $2.2100 a pound.

  Arabica-coffee futures prices have doubled this year as Brazil's worst drought in decades hurt

this season's crop from the world's top grower and has weakened trees, casting doubt over next

year's harvest.

  Most of the month has been dry for Brazil's main coffee-growing region and rains aren't expected

to hit until next week, according to Sao Paulo-based forecaster Somar Meteorologia.

  "If it doesn't rain until the end of the month it's going to be a problem," said Rodrigo Costa, an

analyst and a director at New York brokerage Newedge.

Brazil is the source of around half of the world's arabica beans.

  Orange juice for November was up 1.5% at $1.3525 a pound, after settling near a more than 11-year

low in reaction to a Nielsen report published by the Florida Department of Citrus that showed U.S.

retail sales of the breakfast beverage for the 2013-14 season dropped to the lowest level in at

least 16 years. Americans bought just 525.1 million gallons of the beverage in the year that ended

Sept. 27, according to the Nielsen data. That's the lowest since 1998-99, the oldest data available.

Cocoa for December was up 0.3% at $3,068 a ton.

  Europe's third-quarter cocoa grindings fell 1.1% on the year to 327,866 metric tons, figures from

the Brussels-based European Cocoa Association showed Tuesday. The figures, which measure the weight

of cocoa beans processed, are regarded as a proxy for chocolate demand.

  "Undoubtedly, the [traders are] still worried about all the risk to the price of cocoa should

there still be supply disruptions in West Africa," said Hector Galvan, a senior broker at RJO

Futures in Chicago, referring to the Ebola outbreak.

West Africa is the source of more than two-thirds of the world's cocoa.

  Raw sugar for March was up 0.2% at 16.70 cents a pound, while cotton for December was 0.4% higher

at 65.27 cents a pound.

Brazilian Coffee Trees Deteriorate, Last Flowering Lost

Belfast (CoffeeNetwork) Persistent dry and hot weather in key Brazilian coffee regions has resulted in a notable deterioration of trees in the first half of October, say agronomists, and all indications are that the flowerings that were seen towards the end of September have been lost. Moreover, there is no rainfall in the forecasts for this week and unusually hot temperatures are expected to continue.

Extended weather models suggest that the earliest possible opportunity for rainfall is early next week, but current expectations are that volumes will be erratic, with no widespread coverage to induce what could be called the start of the true wet season, and 2015/16 flowering.

CoffeeNetwork highlights that World Weather, Inc. projects that there will be gradually improving rainfall total from next week, in the last days of October, and that the greatest volumes may not be until early November. Rainfall totals of 8-20 mm could be seen next week, but these will not be uniform in all key growing regions. Somar also points to rains after 22 October, and its graphics suggest around 25mm in key coffee areas by the end of the month, with perhaps close to 35mm in one part of Minas Gerais.

Agronomists note that the average for October is generally taken to be 130-145mm.

On top of the lack of rainfall, as highlighted by CoffeeNetwork for the last number of weeks, is the stress placed on the coffee trees by the extraordinary temperatures. This was partly explained in the last week's Amazon Moisture Flow report by CoffeeNetwork.

It is the extent of the tree stress that will determine how flowering occurs if a true wet season begins in November. There are fears that the trees are so weakened that they may not be able to sustain blossoms, instead using the moisture to merely survive. Whether uniform November rains mean a normal flowering phase will only be evident if these occur next month.

CoffeeNetwork underlines that if November brings no significant change in weather patterns, then talk will swiftly move from a "sub-40 million bags crop" in 2015/16, to a "failed coffee crop".

Andrea Thompson

CRESCIMENTO MUNDIAL DA DEMANDA EM XEQUE

O mercado acionário derreteu na semana passada com quedas entre 2.74% e 4.45% entre os índices americanos e baixa entre 2.88% e 4.95% para os indicadores europeus.

A avaliação cautelosa e negativa do FMI sobre a situação da economia mundial, com estimativas de crescimento baixo para países como a Alemanha, o Japão e o Brasil fizeram com que os investidores continuassem a liquidar parte de suas posições em ativos de risco.

Os principais índices de commodities tiveram comportamento misto, reflexo do peso que cada matéria-prima tem em cada um deles. Os mais carregados em energia cederam com as fortes baixas dos contratos de gasolina, petróleo, e óleo de aquecimento. Outros que dão peso similar às commodities agrícolas e metais ficaram virtualmente de lado, já que café, cacau, suíno magro, metais preciosos e trigo subiram.

O contrato de arábica da ICE fez uma nova alta no ano negociando nos mesmos patamares de janeiro de 2012, quando então recuava há alguns meses dos US$ 301.02 centavos de abril de 2011, ou dos US$ 308.90 de maio do mesmo ano, considerando respectivamente a primeira e a segunda posição.

Os ganhos de US$ 18.39 a saca em Nova Iorque e de US$ 4.74 a saca em Londres refletiram mais uma vez do constante adiamento do começo das precipitações em volume e constante no “cinturão de café” do Brasil.

Há também o efeito agudo do aperto financeiro entre os agentes, dada a apreciação acentuada e praticamente ininterrupta do terminal que gera chamada de margens e que também tem aumentado em função de muitos estarem aproveitando a grande oportunidade de ficar ainda mais comprado em diferencial.

O problema é que o alargamento constante do basis, e o contínuo aumento de posição de quem está fazendo a correta aposta de ficar mais long, em um dado momento acaba esbarrando nos limites dos departamentos de risco e financeiro das empresas. Na verdade este é provavelmente o principal motivo dos diferenciais estarem tão abertos.

O agravamento da, mais uma vez, acertada estratégia – que pode ser custosa sim por algum período – vem do fato da demanda recuada e que não permite o giro do livro, um assunto recorrente inclusive na reunião da Basiléia da última sexta-feira dia 10 de outubro.

As conversas que aconteciam em reuniões fechadas ou em bate-papo no centro de conferência onde aconteceu o 5º Coffee Dinner Suíço, além de girarem em torno do atraso das chuvas – que não há consenso se já causou um desastre enorme ou se eventualmente pode ser reversível com a chegada das chuvas até o final deste mês – também tinha um tom de alerta para uma queda do consumo mundial.

Alguns diziam que consumidores em países europeus que tem sofrido com altas taxas de desemprego e recessão já estão deixando de tomar café, logo causando a queda do consumo mesmo que o preço na gôndola do supermercado não tenha sido ainda reajustado para espelhar a alta do terminal recente. Aliás, este seria o motivo da demanda tão pequena que tem se notado há algum tempo.

Diante deste cenário os baixistas (sim há bastante e inclusive com argumentos interessantes) apontam que muitos analistas só estão olhando para um lado da equação, que é a produção, esquecendo-se da enorme disponibilidade de grãos que saíram das origens para o destino, e mais ainda de uma redução da demanda mundial.

Em um mercado cheio de novidades, com uma seca no Brasil acontecendo em um momento sem paralelo, com discussões complexas sobre morte ou deterioração das raízes dos cafezais, degeneração do estômato das folhas, e outros estudos técnicos de baixa compreensão pela grande maioria (o que não significa que não possa ser real), por que não eventualmente vermos o café se transformar em um produto que a um preço alto e com condições macroeconômicas ruins possa ter uma demanda elástica?!

Não creio, pessoalmente, que seja algo representativo, e acredito que caso ocorra queda de demanda isto seja pontual, até porque não faltará café mesmo que a produção brasileira seja menor do que 40 milhões de sacas que alguns acreditam.

Aos meus leitores vale lembra que eu sempre acho salutar ouvirmos opiniões distintas e sermos cautelosos para não olharmos apenas para um lado do mercado – o que agora significa ser altista como se não houvesse limite para a alta. O mercado pode sim subir mais, muito em função de um aperto financeiro que pode forçar recompra de posições, o que pode acontecer com mais postergações do começo da chuva ou por alguém provocando um squeeze – improvável.

Os produtores diante de dúvidas que muitos tem sobre a quem ouvir, estão certos em aproveitar para vender café e colocar dinheiro no bolso. Os exportadores e os dealers vão tentar ficar ainda mais long diferencial brasileiro a 40 abaixo, o que é uma grande oportunidade, pois, se faltar café (o que puxaria o terminal) ou chover bem (pressionando a bolsa) o basis vai estreitar – o desafio é ter caixa para aguentar as variações do contrato futuro até lá.

Na quarta-feira próxima terei mais uma vez o prazer de participar do Simpósio de Mercado e Certificação de Café em Monte Carmelo-MG, o evento número quatro da associação. Depois tirarei alguns dias com a família, de forma que não haverá comentário nas duas próximas semanas, retornando no final de semana do dia 1º de novembro.

Bons negócios a todos.

Rodrigo Corrêa da Costa escreve este relatório sobre café semanalmente como colaborador da Archer Consulting

Coffee Weather

Hot and dry conditions occurred in Brazil coffee production areas Friday into Sunday. A similar situation was expected to prevail for another seven days with the earliest possible opportunity for rain early next week, but even then the resulting rainfall is expected to be erratic benefiting some areas more than others. In the meantime, Tropical Storm Gonzalo will bring torrential rain and strong wind across Puerto Rico raising some risk of damage to coffee production areas.

No measurable rainfall occurred in coffee areas Friday through Sunday morning. Highest temperatures Friday and Saturday were in the 30s Celsius except in eastern Bahia and in one central Minas Gerais location where a few upper 20s were noted. The hottest temperatures occurred from northern Parana to northern Sao Paulo and from northern Minas Gerais to central Bahia where readings were in the upper 30s. Lowest morning temperatures were in the teens to lower 20s with one location not far from northern Sul de Minas reporting 12.

Hot temperatures will prevail over the coming week while rainfall is minimal. Daily highs will range in the 30s to near 40 most often with one or two locations getting to 41 before the week is out. Most of the hottest conditions will not be in the heart of key coffee areas, but may impact portions of northern Sao Paulo and both western and northern Minas Gerais to possibly central Bahia. A few upper 20s will continue near the Atlantic Coast

Low temperatures at night will be mostly in the teens and lower 20s, but a few readings of 10 to 12 may still occur in the next night or two.

"The heat and dryness will more severely stress coffee trees already suffering from limited soil moisture. Recently flowered crops in the south will likely lose their blossoms without experiencing successful pollination and that will reduce the crop a little more."

Rainfall is possible next week, but only as scattered showers and thunderstorms. The precipitation will be welcome as relief from the previous ten days of hot, dry, conditions. However, it is still quite unclear how significant the precipitation will be. World Weather, Inc. anticipates slowly improving rainfall as the month draws to a close with early November precipitation expected to be most significant.

Arabica Coffee Futures Rally to Nearly 3-Year High

Alexandra Wexler

     NEW YORK--Arabica-coffee prices rallied Thursday as concerns about supplies of the beans amid

record demand squeezed the market to the highest level in nearly three years.

     Coffee prices have doubled this year as erratic rainfall clipped output from Brazil, the

world's biggest grower, and fueled worries about how the already weakened trees will fare next

season.

     This is a time of year when rains are needed to help the trees flower, analysts say. But dry

weather has caused some trees to drop their flowers, and others aren't flowering at all. Without

flowers, there won't be any coffee cherries--the fruit that contains the seeds that are roasted to

make beans.

     Brazil is the source of one-third of the world's coffee and about half of the world's arabica

beans, so any disruption in supplies there ripples through the global marketplace.

     Arabica coffee for delivery in December on ICE Futures U.S. rose 3.4% to $2.2165 a pound, the

highest settlement since Jan. 20, 2012.

     "I don't expect it to stop," said Hector Galvan, senior market strategist at RJO Futures in

Chicago. "The weather right now is really going to put the pressure on."

     He expects futures to crack $2.40 a pound in the next two weeks, a level last seen in November

2011.

     The recently ended coffee harvest was Brazil's smallest in three years, after the main growing

region experienced its worst drought in decades in the spring. Next year is an off-year in Brazil's

two-year coffee cycle, meaning production would already have been lower without the unusual weather.

     That lower production is being exacerbated by steadily rising demand for the beverage.

Market-research firm Euromonitor International projects that demand for coffee beans will reach a

record 4.95 million metric tons this year, a 2.5% increase over 2013.

     Global coffee production could fall short of demand in the season that began Oct. 1 by the

largest amount in nine years, according to the International Coffee Organization.

     In other markets, cotton for delivery in December on ICE fell 1.5% to 63.94 cents a pound after

the U.S. Department of Agriculture reported tepid demand for the fiber. During the week ended Oct.

2, net export sales for upland-variety cotton--the most commonly grown type in the U.S.--totaled

68,500 bales, down 35% from the prior four-week average.

But low prices for the fiber could actually turn that trend around, traders and analysts say.

     "Mills will be able to take advantage of the much lower price and the likelihood of similar

values in 2015 and possibly 2016...and boost cotton purchases," said Sharon Johnson, senior cotton

specialist and introducing broker for KCG Futures in Atlanta.

     December-delivery cocoa closed 0.6% higher at $3,057 a ton. Raw sugar for March delivery ended

down 1.3% at 16.70 cents a pound, while orange juice for November delivery was flat at $1.4320 a

pound.

Bloqueio atmosférico afasta chuva do Sudeste

Uma situação de bloqueio atmosférico continua sendo observada sobre a América do Sul e vai dificultar a chegada da chuva e das frentes frias ao Sudeste por mais alguns dias.O bloqueio está associado com a intensificação do sistema de alta subtropical do Atlântico Sul (ASAS) indicado pela letra “A”. O valor de pressão 5900 é tecnicamente alto e já indica que este sistema está forte. O centro deste sistema fica sobre o Sudeste e o Centro-Oeste.

Uma frente fria está avançando pelo litoral da Região Sul, mas sua massa polar é muita fraca e não consegue afastar a forte e grande massa de ar quente e seco que predomina sobre o Brasil. Esta frente fria vai sendo desviada para alto-mar e no fim de semana passa ao largo do litoral paulista, mas sem causar alterações do tempo.

Uma segunda frente fria, mais forte, deve conseguir chegar ao litoral paulista entre os dias 15 e 16 de outubro, mas sua instabilidade ainda não deve se espalhar por todo o Sudeste.

A chuva deve voltar para grande parte da Região só com uma terceira frente fria que deverá se aproximar de São Paulo entre 19 e 20 de outubro. Climatempo

Previsões apontam que áreas cafeeiras devem continuar secas

Uma demora para o desenvolvimento das chuvas nas principais áreas de café arábica do Brasil, num mês em que normalmente ocorre a principal florada para a próxima safra no maior produtor global, eleva as preocupações com a colheita de 2015/16, catapultando os preços nesta semana.
As áreas de café deverão continuar secas em sua maioria nos próximos 15 dias, e só depois disso receberão níveis normais de precipitações, ao final de outubro, disseram meteorologistas.
O café em Nova York começou a semana com alta de quase 10 por cento, para uma máxima de mais de dois anos e meio de 2,255 dólares por libra-peso, com o mercado reagindo a previsões climáticas numa situação de grande déficit hídrico nas regiões produtoras brasileiras, após os cafezais terem sofrido com estiagem atípica no último verão, um dos mais secos da história.
“Cada dia sem chuva, a sede aumenta, e está caindo muita folha dos cafezais... está desfolhando os pés de café e secando os ramos... Uma chuva mais cedo iria manter o potencial que a gente está estimando... Se demorar muito a chover, só Deus sabe...”, afirmou o agrônomo José Braz Matiello, da Fundação Procafé, órgão de pesquisa do setor cafeeiro.
A safra de café arábica 2015/16 do Brasil tem potencial, segundo o pesquisador, para 27 milhões a 29 milhões de sacas de 60 kg, e a de café robusta ficaria entre 13 milhões e 14 milhões de sacas.
Para Matiello, haveria uma estabilidade na produção total do próximo ano ante 2014/15, para 43 milhões de sacas, mas muito em função de um crescimento da safra de café robusta. “O divisor de águas aí é o conilon (robusta), aparentemente está bom.”
A Companhia Nacional de Abastecimento (Conab) vê uma safra 14/15 acima da previsão da fundação, em 45 milhões de sacas, sendo 32 milhões de arábica.
Matiello, que esteve recentemente no Sul de Minas, principal região produtora de café do Brasil, disse que a situação ainda é crítica com relação às floradas para 2015.
“Tem lugares que não abriu flor, outros abriu um pouco, outros abriu normal, as lavouras estão murchas, isso na principal área produtora”.
Segundo o pesquisador, uma vez que a florada ainda não está estabelecida na maioria das regiões, é cedo para afirmar se o potencial vai ser alcançado ou não. Agência Estado

Chuva em parte do Sul do Brasil
Nesta sexta-feira (10/10) o dia será nublado com períodos de chuva no centro-sul e leste do RS e com pancadas de chuva a partir da tarde nas demais áreas do Estado e com menores chances no sul de SC. Haverá chance de volumes significativos no sul do estado. Sobre o setor noroeste do país haverá muitas nuvens e pancadas de chuva forte. Na parte da tarde deverá chover entre o AC, RO, sul e oeste do AM, oeste e norte do PA e no norte do MA. O sol aparecerá entre o MS, GO, DF, boa parte do Sudeste e entre o norte de SC e no PR. Sobre o leste do Nordeste o dia será com variação de nuvens e chance de chuva fraca no litoral. Nas demais áreas do Brasil sol, variação de nuvens e pancada de chuva rápida na parte da tarde.

REGIÃO SUDESTE

10/10/2014: No norte do ES e no nordeste de MG: sol e variação de nuvens. Nas demais áreas da região: predomínio de sol. Temperatura estável.
11/10/2014: No litoral do ES e sul de SP: sol e variação de nuvens. Nas demais áreas da região: predomínio de sol. Temperatura estável. A temperatura estará elevada.
Tendência: No Litoral Sul de SP e no Litoral Norte do ES: variação de nuvens. Nas demais áreas da região: predomínio de sol. 

ICE Coffee Bulls Retreat From New 2014 High -- Technical Analysis

Kira Brecht

  ICE December coffee futures are slightly weaker Wednesday, as the market retreats from the fresh

2014 high scored on October 6. An explosive move higher in late September and early October saw the

coffee market hit overextended and overbought technical readings, which leave the market vulnerable

to a period of correction and consolidation.

ICE December coffee recently traded down 25 points at $2.1610.

  The past several weeks have seen the coffee bulls seize control of the market. After basing out at

the $1.7640 level in late September, the December contract climbed quickly higher, touching a new

2014 high at $2.2550 on October 6.

  The market pierced the late April price peak at $2.2260 intraday on the latest price run-up.

However, the coffee market registered overextended technical readings, trading above the upper daily

Bollinger Band line for the previous four sessions. Markets rarely can stay above the upper line for

long, before a reversion-to-the-mean type of reaction sets in, which is occurring now in the coffee

market. Additionally, the 14-day relative strength index hit overbought levels at 72% on October 6,

and has now slipped lower below the overbought line at 70%.

  This simply shows that the coffee bulls propelled the market sharply higher in recent weeks and

bullish fatigue is setting in. The bulls have run out of steam and the coffee market is vulnerable

to a period of consolidation or correction, as the market tests resistance from the April high at

$2.2260. The December coffee contract did not close above that level on the run-up.

  Near term resistance is now seen at $2.2260-2.2550, and that is the level the bulls need to scale

to open the door to a fresh up wave in coffee market action. However, for now, that level could hold

firm as the coffee market may need to pause to digest the recent price run-up.

  Overall, the moving average outlook is bullish for December coffee. The contract is trading above

its 10-day, 20-day, 40-day, 100-day and 200-day moving averages, which is a bullish position for the

trend following crowd.

  A look at the monthly continuation chart for ICE coffee also shows a bullish upside breakout

developing in October. But a monthly continuation contract close in October above the $2.1570 zone

(the April 2014 monthly continuation high) is needed to confirm that breakout.

  Bottom line? Price action is bullish. But the coffee market ran up quickly in recent weeks and

became overextended and overbought. Near term support lies at $2.0540 for December futures. As long

as that floor holds firm, the technical trend outlook is sideways to higher and the bulls may just

be biding their time before another attack on the upside is seen.