Coffee prices today Fundamental Outlook 26 2011

Coffee prices today Fundamental Outlook 26 2011 : Coffee prices slipped to a 5-3/4 month low as they extended their downward correction from May’s 14-yr high. Bearish factors include (1) reduced supply concerns with Brazil’s coffee harvest 64% completed and most its beans of high quality, according to Somar Meteorologia and (2) ICO data that showed May global coffee exports rose to 9.3 mln bags, up +16% y/y. Bullish factors include (1) USDA forecasts for global coffee output to fall 2.1% to 135 mln bags in the 2011-12 marketing year, (2) the prediction from Brazil’s Ag ministry for Brazil’s coffee output to fall 9.5% this year to 43.5 mln bags as trees enter the lower-yielding half of their 2-yr cycle, and (3) ICO’s statement that coffee supplies will be “tight” the rest of the year as stockpiles in producing nations stay near a 40-yr low of 13 mln bags.

Fundamental Outlook—Bull Market Correction —Coffee prices are consolidating well below their 14-yr high. Coffee production in 2010/11 rose +8.8% y/y to a record 137.9 mln bags (USDA), but production should fall -2.1% y/y 135 mln bags in 2011/12 Brazil’s 2011/12 (Jul-Jun) production will fall -9.7% y/y to 49.2 mln bags on the off-year of the biennial cycle (USDA).