11-08-2011: December Coffee: Worldwide Production Appear To Be Increasing
We fed coffee, cocoa, and sugar into a neural network to get the following result:
December Coffee:
December Coffee:
The signal is hard to see in the chart below, but if you look carefully, there is a buy signal a little after the start of September.
Sluggish U.S. equity markets and a rally in the U.S. Dollar are two outside forces affecting many commodity markets, but apparently not coffee. A report from the Colombian Coffee Federation indicated this year's production will be 8.5 million bags, providing support for the market. The initial target was 9 million bags. However, updated forecasts show coffee exports from Vietnam will increase sharply this year. The Mexican Government indicated this season's coffee production would be 4.2 million bags, lower than previously-estimated. Brazil, as always, is a key factor and more rains are needed there in the next 2 or 3 weeks. However, favorable weather is expected by most analysts. ICE exchange stocks were up 6,895 bags last week to 1.286 million as of Nov. 4th, with 320,926 bags pending review. The Peru Coffee Chambeer sees 2011 exports at $1.3 billion. Guatemalan October Coffee exports were up +47% on the year to 99,301 60-kg bags. Uganda October coffee exports were up 14.5% on the year on better yields to 215,315 bags on the back of higher yields. Uganda is Africa's top coffee exporter, and is upgrading border posts to lower the cost of cross-border trade by reducing the number of checkpoints and clearning houses in that landlocked nation. Coffee sales at the Nairobi, Kenya Coffee Exchange for the 2010-2011 crop year were 33,680 metric tonnes, down 2,000 tons from the previous year. Kenya is a relatively small grower, but its specialty beans are famous for high quality and much sought after for blending with coffee from other producers. Kenya is expecting a lot of reinvestment into coffee production due to current high prices. Kenya forecasts a rise of 6% in the next season's production. Our overall interpretation of the above news is that production worldwide is rising and will probably put a lid on prices.
338.0I T 11/ 4
I CSCE- Dec-11 Coffee "C", 37500 lbs, c/lb. Cm.=0.08 Lim.= 5.6
I
I
I
318.0I_________________________________________________________________________
I
I
I X
I XO
298.0I_________________________X___XO__________________________________________
I XO XO
I XO XO
I XO XO X
I XOX XO XO
278.0I_________________________XOXOXO____XO____________________________________
I XOXOXO XO
I XO OXOX XO
I X OXOXOX XO
I X O OXOXOXO
258.0I_________________________X____O_OXOXO____________________________________
I X OXOXO
I X OXOXO
I X OXOXOX
I X X O OXOXO
238.0I_______________________XOX________OXOXO__________________________________
I XOX O OXO
I XOX OXO
I XO OXO
I X O O
218.0I_____________________X_X_________________________________________________
I XOX
I XOX
I X XOX
I XO XO
198.0I_XO________________X_X___________________________________________________
I XO XOX
I XO XOX
I XO X XOX
I XOX XOXOX
178.0I_XOXO__________X_XOXO____________________________________________________
I XOXOX XOXOX
I XOXOXO XOXO
I OXOXO XOX
IO OXO O XO
158.0I__O___O________X_________________________________________________________
I O X X X
I O XO XOX
I O XOX XOX
I O XOXOXOX
138.0I______OX_XOXOXO__________________________________________________________
I OXOXOXOX
I OXOXOXO
I OXOXO
I O O
118.0I_________________________________________________________________________
I
I
I
I
98.0I----I----I----I----I----I----I----I----I----I----I----I----I----I----I---
1 1111 11
223478912568891677889012213334566678900
200102102010112102232111301220001211012
786787190553859169400323130147537856936
The above point-and-figure chart is giving a conventional sell signal.
We are headed toward a cyclical high and a seasonal up period.
Our best-performing internal program is "LSS3Day." It is giving a buy signal.
Results of "LSS3Day" for Coffee (blue lines = successful trades, red, unsuccessful): (Always in the market.)
Our third system has triggered a buy signal. (Note, disregard the year on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)
The point value is $375. Initial margin on a single contract is $8,316. Use of options is advised.
Scale trade sellers are entering the market for the long term in this price range.
In the chart below, the yellow line is the futures price, read on the right axis. All other colors are read on the left axis. Blue is small speculators. Red is large speculators. Green is commercials. Large speculators with the best track record are getting increasingly-short.
The average volatility shown below suggests that a downtrend remains intact from the last volatility low point.
Our option trade recommendation is to Sell the Coffee May 230 Call @ 24.85 or better.
What the Dec. - Mar. calendar spread suggests to us is that buying the near contract and selling the far one is at most times not profitable, which we think is a sign that these futures may go down. The best time to enter or leave the above spread is when it is at -2.70 or narrower buying the far as prices are falling and then selling the near, and exiting or entering when it is at -3.70 or wider sellling the far as prices are rising and then buying the near.
Here's an intraday chart for the previous day ( 11/04 ).
Risk Versus Opportunity Report
________________________________
KCZ1 December Coffee
High Price: 249.2
Current Price: 230.2
Low Price: 190.6
Risk: -0.173
Opportunity: -0.360
(O/R) Ratio = 2.084
| Factors | Weighted Points |
|---|---|
| Inter-Market Analysis | + 1 |
| Parabolic Chart | - 1 |
| Nirvana Chart | + 1 |
| News | - 1 |
| Point & Figure | - 1 |
| Cyclicals | + 1 |
| Seasonals | + 1 |
| Internal System 1 | + 1 |
| Internal System 2 | 0 |
| Third System | + 1 |
| Historic Range | - 1 |
| Commitment of Traders | - 1 |
| Range/Volatility | - 1 |
| Level Table | - 1 |
| Other Factors | - 1 |
| Total | - 2 |
Place 1 December Coffee on a Sell Watch with stoploss @ +12.60 above the get-in point._____________________________________________________________________________________________________________________________B.I.
