
As reported by a International coffee classification ICO, a coffee marketplace fell in Apr due to over supply concerns. However this follows a predicted batch draft pattern, and might have been an event for speculators to take profit, as good as any institutions that reacted to increasing supply. On Friday Rabobank India expelled a report, warning of a supply necessity approaching in 2017-8, with a tiny necessity remaining for 2016-7. The coffee marketplace is during an critical intensity rhythm point.
Coffee prices fell neatly during a finish of Apr as institutional investors sole off their positions. The coffee marketplace continues to be good granted as sum exports in a initial half of coffee year 2016/17 are estimated adult by 4.8% to 60 million bags. In deficiency of elemental news, a opinion for a 2017/18 stand is generally certain though some uncertainties remain.
The remarkable tumble in prices in a second half of Apr is generally a outcome of complete activities of sidestep supports offered off prolonged positions, that had been building adult over a past months. This comes opposite a backdrop of an increasingly certain opinion for sufficient supply of coffee on a universe market.
All 3 Arabica groups fell significantly though a sharpest decrease was accessible for Other Milds, that were down by 3% compared to a prior month. The normal prices for Colombian Milds and Brazilian Naturals were 2.2% and 2.6% lower, respectively. The differential between Colombian Milds and Other Milds, that has been consistently disastrous for some-more than 3 years, has reached a narrowest opening in 26 months, down to -0.43 US cents/lb. The prices for Robusta showed a identical decrease and were 3% reduce reaching a monthly normal of 103.58 US cents/lb. The Arabica/Robusta arbitrage, as totalled on a New York and London futures markets, forsaken by 1% to 43.92 US cents/lb, a lowest turn given Jan 2014. (Further fact is accessible in their report)
On Friday Rabobank India expelled a following report (Reuters):
Rabobank on Friday raised a foresee for a coffee supply necessity to 6.8 million 60-kg bags in 2017/18, adult from a prior projection of 5.3 million bags.
- Raised both prolongation and direct forecasts for 2016/17, leaving a tiny necessity of 1.2 million bags a necessity of 3.8 million bags of Robusta offsets 2.6 million bags over-abundance of Arabica
- Sees deficits of 3.7 million bags of Arabica and 3.1 million bags of Robusta in 2017/18
- Sees “significant prohibited coffee marketplace value growth” over a subsequent 5 years globally
- The Brazilian genuine stays a intensity bearish factor

COT Charts
From a COT draft we can see that a positions for vast specs have forsaken and commercials have risen, assembly in a center during what is a chronological ‘bounce’ position. Producers and managed income have also met, during a turn identical to Feb 2016 (which combined a marketplace low).

Seasonal Charts
Seasonal charts advise debility from May into midst June, though that’s from a poignant May high, since coffee is now on a COT draft low.



Investing in Coffee
There are two coffee marketplace ETNs. The first-generation product (NYSEARCA:JO) tracking front-month-futures, and one second-generation product (NYSEARCA:CAFE) tracking a agreement over out on a bend with a lowest grade of contango. A giveaway responsibility ratio calculator is accessible here.
Stock Charts
The coffee draft illustrates a hoop in a crater and hoop pattern.
The crater and hoop draft settlement can have several permutations, a draft subsequent illustrates one, that has candlestick ‘support’ on a highs of a inside of a cup. (source:Nasdaq – beliefs of technical analysis).

On a nearby tenure draft below, Friday trade sealed with a white daily candlestick, carrying combined a intensity brief tenure ‘double bottom’, and from a late Apr over sole level. There is some certain dissimilarity on a RSI, notwithstanding a reduce coffee price, and an MACD about to go positive.
A delay of a trade settlement on Friday this entrance week should outcome in a mangle out from a May down trend, generally in response to a news circulated by Rabobank on Friday, joined with a stream COT positions of traders. The down-side is limited, with a serve rope of support combined from trade in Q1 2016, and charity a means to conduct stream risk.
The aim for a crater and hoop settlement is good over a ‘rim’ of a cup, (there might even be a response identical to that of 2014 as news unfolds in a residue of a year), though we should during slightest see a resumption of a 2016 character bullish trend earlier rather than later.
Disclosure: I/we have no positions in any bonds mentioned, and no skeleton to trigger any positions within a subsequent 72 hours.
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