They’re spilling the beans in Guaruja, Brazil….
My caffeinous indulgences have to be tamed.
My enthusiastic expectations have had a setback since the rains came and the smart ‘knowing’ money took profits in the last week or so, with Arabica coming off it’s highs and consolidating (along with all the other markets I watch!).
My own long was taken out by my (in-the-money) stop loss late yesterday on a break of the wedge seen on the chart. I had locked in USD4.5 cents but had seen the other twenty disappear quickly. My view hasn’t changed and will be buying the dip, along with many others, I suspect.
Likely consolidation could see the lower bounds of the channel tested but the game hasn’t changed.
As I am writing, my new pals (I shall call them the Three Wise Men) are keeping me abreast of news from the annual conference of the wide-eyed and well-caffeinated who are concluding a talkfest in Guaruja, Brazil. The great and good of the coffee trade have bean swapping notes, news and the latest gossip; the gathering includes producers, trade and agronomists. And it will no doubt be the latter getting a roasting if their predictions are wrong!
I am informed that the 2014/15 crop is now expecting to show a production level of 45-50m bags (one bag = 60kg beans) – a deficit of up to 7.5m bags compared to the surpluses of the previous two years.
The surplus will ease the blow of this year’s shortfall but the longer term news will determine the fate of the price in the near future.
For now, consolidation is the word. Further clarity (read ‘bad news’) will be needed to drive the price on. There is also a view amongst some key traders that the worst news is already ‘in the price. However the downside should be limited.
Meantime, I am restraining my ristrettos!
Author: David Horton is a partner in Market Tutors Ltd in the city (markettutors.com). He has had a significant career in financial markets; he is a trader and trainer with a passion for coaching and mentoring with a good dose of humour.
davidhorton@markettutors.com
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