Wt Coffee Discussion Threads

[bobp] 09/12/2002 20:17

If ever I can't sleep at night I'll read this.

[energyi] 09/12/2002 18:47

worth looking at cot figures....
CHART:


Red : Comm'l Net Longs.
Blue: Lg. Spec. Net Longs

Last time Spces. got so long, it took 1-2 months to "work it off"

[energyi] 09/12/2002 17:14

76 - 11 = 65 target?

52 to 72, retrace to 62?

[energyi] 09/12/2002 17:13

A Bear's Breakfast – Coffee, Orange Juice
By James Cordier - President, Liberty Trading Group

. Dec 9, 2002 6:34:52 AM Email this article Print this article

After floundering near 30 year lows for the first half of 2002, Coffee prices managed to stage a 22 cent rally that began in July and appears to have topped out in October at 76 cents per pound. As we are talking about coffee futures, prices tend to look ahead to the coming crop when pricing forward contracts. This is one reason why coffee futures prices traded near 30 year lows earlier in the year as the market priced in this year's 45 million+ bag Brazilian harvest. As the market began to look forward to next year's crop (expected to be an "off" year for Brazilian growers) prices began a slow, albeit steady ascent. Early estimates put next year's crop anywhere between 22 and 35 million bags. The trade appeared to be already pricing about a 28 million bag harvest for next year. Most farmers attribute the lower production numbers to the biannual crop cycle, and dry weather in September and October.

Yesterday, Sao Paulo Agricultural consultants Safras e Mercado came out with their first official estimate for the 03/04 Brazilian crop. Safras estimated the crop will produce between 31 and 34 million bags of coffee beans next year, a figure that is at the high end of estimates and seems to have caught the market off guard. Bulls were giving a lot of credence to drought talk and the argument that yields would be severely hurt by the lack of rain in August and September. Safras, however, clearly feels the damage has been more limited. Safras' estimates are given much weight in the industry as they are an independent research firm and are not subject to the biases that can sometimes come with official government estimates.

In addition, the company pegged the final tally for the 02/03 crop at 50.15 million bags, up from the last estimate of 45.6 million bags. This not only lends more weight to the USDA's figure of 51.6 million bags, but is a clear blow to the bulls. In summary, Safras added about 5 million bags to the 02/03 crop and another 5 million bags to the average guess for next year's crop. If these figures are correct, the market has just "found" about 10 million bags of extra coffee beans. To put this number in perspective, 10 million bags is roughly equal to the total coffee production of Columbia last year.

While the impact of this year's record harvest will almost surely continue to be felt in the coffee industry for months or even years to come, a Brazilian crop of 31-34 million bags for next year would put production right in line with figures from 00/01 and 01/02 – not a record, but hardly a recipe for a price explosion.

Traders who sold calls in March, May, July and September with strike prices over $1.00 should hold positions as premium deterioration is likely over the next 30 days. With today's numbers, the expectation of Vietnamese selling coming into the market soon, and a clear trendline violation occurring with today's 380 point price drop, we would not be surprised to see a sustained price correction in the coming weeks.

While premiums will deteriorate rapidly if the market retreats, we think today's crop estimates gives the green light to prospective sellers of Coffee calls for the next several months. We expect the market to remain in about a 15 - 20 cent price range through at least the first quarter of next year. While we know this is a fairly wide range, it's all we need to know for writing option premium.

The USDA released it's "Tropical Products" report today which addresses the Brazilian and Worldwide Coffee Situation in detail. Total world production for the 02/03 crop year was pegged at 125.1 million (60 kg) bags, up 12% over last year and a new world record for coffee production.. Demand has remained relatively unchanged.

Orange Juice Comment

The USDA releases it's estimate for the 2002/03 Florida Orange crop on Tuesday. While the average trade guess has the crop pegged at around 197 million boxes, our work suggest a figure somewhere between 200-205 million boxes.

We are of the opinion that the seasonal price slide that tends to occur in Orange Juice is already underway. As producers gauge the size of their upcoming harvest, they usually begin to hedge the crop which pressures futures prices. This is one of the main reasons we often see a price drop in Orange Juice through the month of December.

Florida Orange harvest begins in late November with the early crop and concludes in February and March with the harvest of the sweeter Valencia oranges. However, producers will usually hedge the crop by December to take advantage of any freeze premiums that have built into prices.

While the window for selling call premium in Orange Juice appears to be closing, a rally back to the 103-104 price range (basis the March contract) would still look like a selling opportunity.

Please feel free to call if you would like more information on option writing or any of the ideas mentioned above.

James Cordier & Michael Gross, Liberty Trading Group

James Cordier is head trader and president of Liberty Trading Group, a brokerage firm specializing in option writing on commodities. James' market comments are published by several national financial publications and worldwide news services.

[energyi] 03/12/2002 16:10

Resistance at 72. Will it hold?

[energyi] 18/11/2002 21:14

Coffee Futures and Options


COFFEE FUTURES look very interesting on ...




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SEASONALITY (J. Wyckoff):
Coffee: The frost season in Brazil occurs during the May-August period. In anticipation of this frost, prices tend to rise from January into June. This seasonal tendency is not real strong, however, because coffee can come from other producing countries, such as Mexico. Still, the potential for a Brazilian frost should be monitored. The other seasonal influence is during the winter, when U.S. coffee consumption tends to rise.

:LINK:
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COMMENT, from Liberty Trading:
"Coffee

The market is in the process of adjusting to a higher price range in anticipation of next years lower Brazilian crop production. Next year will be a cyclical "off year" for coffee growers after producing this year's near record 48 million bag crop. Estimates project next year's crop to be 25-30% lower than 02/03. However, with bulging warehouse stocks and the market still dealing with the supply glut created by this year's harvest, we feel the market may be close to the top of a new price range already. With Vietnamese harvest pressure expected soon, selling distant coffee calls still appears to be a solid strategy over the near term.

A trader short calls at strikes 60 to 70 cents above the market does not have to be overly concerned with 10-15 cent price rallies."
:LINK:

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Commodity threads:
Coffee------:
Corn & Wheat:
FreightShips:
Orange Juice:
Soybeans----:
Sugar-------: