Short term
Trade view / 18 May 2015 at 23:18 GMT

Brazil's coffee export dip to support prices

Managing Partner / Spotlight Group
United Kingdom
Instrument: KCN5
Price target:
Market price:
Background

With Brazil's coffee export surge drawing to a close, undermined by weakening production, will this be supportive for prices in the commodities market?

The availability of coffee for shipment from the leading global producers hit a record in 2014-15 on an April-to-March basis but the International Coffee Organisation (ICO) claims this will be significantly reduced over the next year.

The forecast reflects the extent of the decline in Brazilian inventories from the 2014-15 rise in exports, of 12.4% to 32.7m bags, during a season of disappointing production which was hit by persistent drought in the major growing state of Minas Gerais.

The ICO points to an estimate from Brazil's Conab bureau of coffee production of 45.3m bags last year that indicated a harvest shortfall of more than 8m bags, assuming domestic consumption of some 21m bags besides export demand.

The data suggests significant volumes of domestic stocks have been used to supply the market over the last year and if one assumes that Conab is correct in its estimates, this year's Brazilian coffee harvest of 44.1m to 46.6m bags will provide exportable production availability of just 24m bags for this season. Consequently it is likely that Brazilian exports over the next 12 months are going to be significantly lower.

Questions over production and inventory

The ICO has acknowledged that several recent reports forecast Brazil's coffee exports at 33.3m tonnes in 2015-16, on a July-to-June basis, a drop of some 2.8m bags on its estimates. One has to add to this the news that the Conselho Nacional do Café producers' group has expressed concerns that the gap over how much coffee is left in Brazilian inventories appears even greater.

Laying Brazil for a moment, one has to recognise that the ability of rest of the world's supplies to fill the Brazilian gap may be compromised. Olam International cautioned over the nascent El Nino impact on coffee production in Vietnam which is reported to have the potential to deliver a 100-year drought.

In parts of Indonesia and Vietnam, one should expect declines in production amid lower rainfall. Much of Vietnam, the top robusta coffee-producing country, is already grappling with dryness, making crucial a strong rainy season which should start imminently in the key Central Highlands coffee regions and last to the late-year harvest period.
 Source: www.investing.com 
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Parameters  Coffee KCN5 July 2015 US cents /lb

Entry: Buy at 142.62

Targets: 147.50…151.63…156.74

Stop: 1301.00

Time horizon: Short-term



— Edited by Susan McDonald

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Non-independent investment research disclaimer applies. Read more
4y
vanita vanita
sir stephen,
you track india nifty?
4y
Stephen Pope Stephen Pope
Hello Vanita,

It is not my main market to follow, however, the attached chart will hopefully provide some guidance.

I am looking at the index having scope to retrace the upside to the 8600's or 8668 more precisely based on the usual pattern of rotation that the Nifty has shown in the past as the corrective channel has been played out. A break over 8700 would be highly encouraging as 8812 would then be in play. I have marked with red and green outlined the next key targets for both up and down movements.

Steve
4y
vanita vanita
thanxs steve
4y
bgold bgold
Brutal coffee.... Lets hope for the farmers there is a bottom. With KCN5 making new lows, i wouldn't hol dmy breadth. for reference: https://pbs.twimg.com/media/CE1QGusWoAEGJru.png:large

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