The commodities market didn't bring us a lot of surprises during the
period from June 1 to July 12. And though one can't say it was
definitely moving along with all world markets, yet the common
tendency of growth can be noticed here.
During this period coffee price (NYBOT – Coffee C Futures) went down
0.35 cents and now it is traded close to the level of approximately
98.35 cents per pound. Futures for sugar (NYBOT – Sugar No. 11
(World)) grew up more than 4%, reaching 16.57 cents per pound.
By the estimates of Brazilian traders, during the season of 2006-2007
agricultural year Brazilian coffee export can grow 10% compared to the
previous season, that is up to 27 million of 60-kg bags, and Brazilian
coffee production will grow up to 40.6 million bags. Mr. Braga, head
of Brazilian Coffee Council, said that the two-year up-and-down
production cycle is losing its influence on yearly harvest volumes,
and, as a consequence, the harvest of 2007-2008 agricultural year will
not be significantly less than the previous year, weather permitting.
Meanwhile, in June 2006 Brazil exported 1.49 million 60-kg bags, which
is 17% less than June 2005 export volume. Tanzania expects that its
coffee production during the season of 2006–2007 agricultural year
will grow 65% - up to 55,000 tons.
According to experts, with a relative balance of supply and demand and
unpredictable weather in Brazil and Vietnam, the end of 2006 can
become a calm before the storm in the coffee market , because adverse
weather can lead to a sudden and sharp increase of quotation prices.
Unfortunately, the picture drawn on the basis of the coffee price
graph turned out to be a little vague . There is the worrying fact
that coffee price didn't fall down to the area of predicted lows,
which doesn't happen very often . The gap is quite significant -
almost 5%. This can be the sign that for a short period the price will
fall down to the predicted support level. Or otherwise , the growth
potential is so strong that the prices will not go any lower, at
least until they show a new high.
At the moment both scenarios are possible. The market can continue to
decline until 90-91 cents per pound or restore the growth trend. In
this case, if the upward movement breaks the level of 103 cents, we
can expect growth up to the targets of 130-132 cents per pound. But
when approaching those targets it is important to watch the next
levels of possible resistance: 105, 110 cents and the range of 116-121
cents. If the resistance will be met close to the level of 105 cents
per pound, then there is still a high probability of restoring the
downward trend and reaching the lows. If the resistance will be met at
the levels higher than 105 cents, then the possible correction will
not be so deep, and in the middle term the market will necessarily
recover and move up to its targets at 130-132 cents per pound.