Coffee Futures
The coffee market comes annual phenomenon, which may have a significant effect on prices.
It is called the harvest of coffee in Brazil and begins in may. Although the harvest of this year less than the previous, it is big by the standards of «outside» of the year (coffee trees are held once in two years cycle of the larger and the smaller productivity).
Coffee Futures: When the coffee beans are flooding the market, it puts pressure on the price, regardless of the expected amount of the harvest.
Regardless of seasonal averages, today we have more grounds to believe that the time is shifted from the bulls, and Coffee Futures are ready for a long-awaited fall, or at least, for a long period of consolidation. It should also take into account the following:
- because the price of coffee rose very high, many in the market believe, that they have gone too far; the current bearish, the fundamental reasons do not justify such a high price level. If prices start to turn, this may make the unstable trend, and cause a rapid closing of long positions;
- producers finally began to unload supplies in large quantities, as soon as the prices reached the highest point in the past month. Brazil continues to keep the estimated 1.2 million sacks of coffee Arabica in reserves. Expect that producers want to unload stocks as we approach the new harvest, in conditions of still high prices;
- premature fears about the new poor harvest in Colombia evaporated. It is expected, that the production of coffee in Colombia will increase by 18% in 2011. The production consists mainly of Arabica beans.
Strategy
It is unlikely, and we are convinced that the Coffee Futures go into a downward spiral in 2011. The recent rally has made great number of bonuses (strike price) available for work. Sale of options number before harvest in Brazil, on such inflationary levels justified from the fundamental point of view.
