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Coffee Long

by SignalFactory   ·  March 1, 2022 | 09:58:47 UTC  

Coffee Long

by SignalFactory   ·  March 1, 2022 | 09:58:47 UTC  

Monday’s coffee prices settled moderately lower, with arabica falling to a 1-month low. A stronger dollar Monday sparked long liquidation in arabica coffee futures. Robusta was under pressure Monday on signs of larger supplies from Vietnam after Vietnam’s General Statistics Office reported that Vietnam Jan-Feb coffee exports rose +3.4% y/y to 305,000 MT.

Coffee prices are also under pressure on concern Russia’s invasion of Ukraine will lead to a surge in energy prices that derails the global economy. A slump in the economy could curb consumer spending and reduce coffee consumption as consumers tighten their belts and limit their visits to restaurants and cafes.

Signs of tight global coffee supplies are bullish for prices. Arabica coffee posted a 10-1/4 year nearest-futures high on Feb 10, and robusta climbed to a 1-1/2 month high last Wednesday. ICE-monitored coffee inventories continue to decline and fell to a 22-year low of 980,562 bags last Thursday. Also, ICE-monitored robusta coffee inventories fell to a 3-1/4 year low of 8,818 lots last Tuesday.

The Green Coffee Association reported Feb 15 that U.S. Jan green coffee inventories fell -0.6% m/m and -0.8% y/y to 5,795,841 bags.

Shrinking global coffee supplies are a major bullish factor for prices. The International Coffee Organization (ICO) on Feb 8 cut its 2020/21 global coffee surplus estimate to 1.20 mln bags from a Jan estimate of 2.41 mln bags. ICO also reported 2021/22 global coffee exports during Oct 1-Dec 31 fell -1.6% y/y to 31.289 mln bags. In addition, data from Cafe on Feb 2 showed Brazil Jan green coffee exports fell -14% y/y to 2.9 mln bags.

The pandemic is easing in the U.S., which will lead to reduced restrictions that will be positive for social gatherings and coffee demand. The 7-day average of new U.S. Covid infections fell to a 7-month low last Friday of 65,933.

Below-normal rainfall in Brazil is supportive of coffee prices. Somar Meteorologia reported last Monday that Minas Gerais, a region that accounts for about 30% of Brazil’s arabica coffee crop, received 20.8 mm of rain or only 39% of the historical average last week.

The Colombia National Federation of Coffee Growers reported on Feb 4 that Colombia Jan coffee production fell -20% y/y to 868,000 bags, and Jan coffee exports fell -1% y/y to 1.063 mln bags. Colombia is the world’s second-largest arabica coffee producer.

Arabica coffee prices are seeing support from expectations of lower global supplies due to unfavorable weather and supply chain disruptions. Drought and recent frost events have devastated Brazil’s coffee crop this year and have curbed the growth potential for the country’s coffee crop for the next two years. Conab reported Dec 16 that Brazil 2021 arabica coffee production fell to 31.4 mln bags, down -36% from 48.8 mln bags in 2020. The USDA’s FAS projects that Brazil’s 2021/22 coffee exports would tumble -27% y/y to 33.2 mln bags from a record 45.67 mln bags in 2020/21 as drought and frosts curbed coffee production. However, Conab on Jan 18 projected that Brazil’s 2022 coffee production would recover by +16.8% y/y to 55.7 mln bags.

A supportive factor for robusta coffee is the smaller robusta supply from Vietnam after Vietnam’s General Statistics Office reported on Feb 10 that total Vietnam 2021 coffee exports fell by -0.2% y/y to 1.61 MMT. Surging freight costs and the limited availability of shipping containers have reduced coffee exports from Vietnam, the world’s top producer of robusta beans and the second-largest overall coffee producer.

Coffee Long (Buy)
Enter at: 236.90
T.P_1: 244.15
T.P_2: 257.31
T.P_3: 267.53
T.P_4: 281.97
S.L: 222.90

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