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TECHNICAL ANALYSIS OF ARABICA COFFEE
Last week, ICE US coffee futures closed sharply higher at 124.30 ct/lb. Arabica coffee ended the week up 6% on Friday with a combination of factors, concerns about the upcoming Brazilian and Vietnamese Robusta crops, a weak dollar benefiting commodities, and hopes for a vaccine.
Hurricane Iota hit Central America and Honduras, a major coffee-producing region. Colombian production is expected to remain stable at 14.1 million bags.
The price of Arabica coffee also benefited from concerns about the supply of Robusta coffee. Vietnam, the largest producer of this type of coffee, experienced very heavy rains following the passage of several typhoons, leading to fears of a smaller harvest and smaller bean sizes. Vietnam exported 70,000 tons of coffee in November, down 37.5% from the previous year, according to government data released Sunday.
In Brazil, forecasts for the next harvest are still down due to the effects of drought. Rainfall in the Brazilian coffee belt this summer and also in October and November has been below normal. Brazil is the world's largest producer of Arabica coffee.
As Arabica coffee trees are on a biannual cycle of small and large harvests, the next crop will be smaller anyway.
Internationally, the prospect of Janet Yellen, former FED president, serving as Secretary of the Treasury in Joe Biden's future administration, and the hope of a vaccine is fuelling markets. Many countries are preparing vaccination campaigns. Investors are also anticipating a massive stimulus package, with increased government spending that weakens the dollar. The dollar is still low and in a downward trend, the DXY closes at 91.790.
While waiting for a vaccine, the pandemic is not weakening. We have just passed 62 million cases worldwide, with more than 1.460 million deaths. The United States is the most affected country with more than 267,000 deaths and more than 13 million cases.
WEATHER IN BRAZIL
90% of Brazilian coffee is grown in 4 regions: Minas Gerais, Espirito Santo, Sao Paulo and Parana.
The rainy season has started and lasts until April-May. Rainfall was below normal in October in the Brazilian coffee belt. And, as can be seen below, on the 30-day weather maps, rainfall was also lower in November. The rains were late in coming and irreversible damage is feared for the next harvest. Last week's rains were again below normal, which partly explains the more than 6% increase in Arabica coffee prices on Friday. According to forecasts, next week there will be a 70% chance and more of receiving rainfall above 50 mm.
ICE US CERTIFIED COFFEE STOCKS
Coffee stocks are up to 1.245 million 60 kg bags, compared to 1.236 million bags the previous week. ICE US stocks of Arabica coffee are below the five-year average. The low stocks may provide some support to the coffee price on futures contracts.
THE DOLLAR
The DXY index representing the Dollar against a range of foreign currencies closed last week down to 91.790, and the trend is still bearish. This is the first close below the 92 resistance level in almost 2 1/2 years. The presumed appointment of Janet Yellen as U.S. Treasury Secretary and Joe Biden's talk of a massive $3 trillion support package weighed on the Dollar. Forex traders are anticipating an increase in the money supply. In addition, U.S. unemployment figures, consumer confidence indexes and inflation figures disappointed last week.
Last week, the Brazilian Real closed slightly higher at 0.1872. The Brazilian Real has been benefiting from the weak Dollar in recent weeks, but the underlying trend of the Real is still bearish and historically low. The BRL/USD pair is positively correlated with coffee futures prices. A weak Real increases the competitiveness of Brazilian producers, and encourages them to export.
TECHNICAL ANALYSIS OF ARABICA COFFEE
Last week, ICE US coffee futures closed sharply higher at 124.30 ct/lb. Arabica coffee ended the week up 6% on Friday with a combination of factors, concerns about the upcoming Brazilian and Vietnamese Robusta crops, a weak dollar benefiting commodities, and hopes for a vaccine.
Hurricane Iota hit Central America and Honduras, a major coffee-producing region. Colombian production is expected to remain stable at 14.1 million bags.
The price of Arabica coffee also benefited from concerns about the supply of Robusta coffee. Vietnam, the largest producer of this type of coffee, experienced very heavy rains following the passage of several typhoons, leading to fears of a smaller harvest and smaller bean sizes. Vietnam exported 70,000 tons of coffee in November, down 37.5% from the previous year, according to government data released Sunday.
In Brazil, forecasts for the next harvest are still down due to the effects of drought. Rainfall in the Brazilian coffee belt this summer and also in October and November has been below normal. Brazil is the world's largest producer of Arabica coffee.
As Arabica coffee trees are on a biannual cycle of small and large harvests, the next crop will be smaller anyway.
Internationally, the prospect of Janet Yellen, former FED president, serving as Secretary of the Treasury in Joe Biden's future administration, and the hope of a vaccine is fuelling markets. Many countries are preparing vaccination campaigns. Investors are also anticipating a massive stimulus package, with increased government spending that weakens the dollar. The dollar is still low and in a downward trend, the DXY closes at 91.790.
While waiting for a vaccine, the pandemic is not weakening. We have just passed 62 million cases worldwide, with more than 1.460 million deaths. The United States is the most affected country with more than 267,000 deaths and more than 13 million cases.
WEATHER IN BRAZIL
90% of Brazilian coffee is grown in 4 regions: Minas Gerais, Espirito Santo, Sao Paulo and Parana.
The rainy season has started and lasts until April-May. Rainfall was below normal in October in the Brazilian coffee belt. And, as can be seen below, on the 30-day weather maps, rainfall was also lower in November. The rains were late in coming and irreversible damage is feared for the next harvest. Last week's rains were again below normal, which partly explains the more than 6% increase in Arabica coffee prices on Friday. According to forecasts, next week there will be a 70% chance and more of receiving rainfall above 50 mm.
ICE US CERTIFIED COFFEE STOCKS
Coffee stocks are up to 1.245 million 60 kg bags, compared to 1.236 million bags the previous week. ICE US stocks of Arabica coffee are below the five-year average. The low stocks may provide some support to the coffee price on futures contracts.
THE DOLLAR
The DXY index representing the Dollar against a range of foreign currencies closed last week down to 91.790, and the trend is still bearish. This is the first close below the 92 resistance level in almost 2 1/2 years. The presumed appointment of Janet Yellen as U.S. Treasury Secretary and Joe Biden's talk of a massive $3 trillion support package weighed on the Dollar. Forex traders are anticipating an increase in the money supply. In addition, U.S. unemployment figures, consumer confidence indexes and inflation figures disappointed last week.
Last week, the Brazilian Real closed slightly higher at 0.1872. The Brazilian Real has been benefiting from the weak Dollar in recent weeks, but the underlying trend of the Real is still bearish and historically low. The BRL/USD pair is positively correlated with coffee futures prices. A weak Real increases the competitiveness of Brazilian producers, and encourages them to export.