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Volatility in Coffee


Coffee prices have seen volatile trading action this week as mixed supply-side news was unable to overcome increasing demand concerns. The market continues to hold its ground above the early October lows, however, and may be forming a short-term low. Reports of increasing coronavirus lockdowns in Europe weighed on the coffee market as it points toward lower demand from a region that had been a source of demand-side strength.


The cocoa market has avoided negative surprises with 2 of 3 critical demand-side gauges this week, but negative key outside markets and news from Europe continue to fuel concern over demand prospects over the rest of this year. The fourth quarter Asian grindings total came in down 10%, with trade estimates looking for a 4.5% year-over-year year decline.


The market remains in a steady uptrend and the highest close since February 21st is a positive technical development. Too much rain has been the issue for both US and India crops and recent rains in India could cause some significant losses coming right into the harvest. The rally was impressive given the sharp rally in the dollar.


Sugar prices remain in close proximity to Monday’s 7-month high, but they have seen 2 sizable pullbacks into negative territory over the past 4 session and are on-track for a negative weekly result. Unless it can find carryover support from key outside markets, sugar is vulnerable to significant long liquidation and profit-taking.

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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