Coffee Price under pressure, Futures and Supply Gain

Coffee prices have basically been under pressured since May 2011 when they peaked above $3. Recent price action looks like coffee could be forming at least a short term bottom. Coffee futures gained 3.65 cents on the March contract to close at $2.1965 a pound on Monday.

When we look at the fundamental news, it doesn't look that great. In fact, the coffee market is well supplied in the near term, but there are a couple of factors that might make the picture look better.

The main news might be the fact that Vietnam could be holding a large amount of their supply off the market in an effort to wait for higher prices. Holding supply off the market can cause coffee prices to rise and Vietnam has successfully pulled this trick off in the past. Vietnam is a large coffee producer of lower quality beans, but they still carry a lot of weight.

The higher quality beans are actually in short supply right now and that could also be influencing a bounce in the market. I can't say it is time to run out and buy coffee, but the chart is flashing some buy signals right now. It looks like the coffee market is forming a double bottom with a nice spike reversal bar on Thursday after it broke support. Today, the market looked like it was going to make a break lower, but it reversed higher and that looks positive heading into Tuesday.

Category: Coffee, coffee commodity, coffee futures, coffee market 2012, coffee price, coffee supply 2012