Coffee was actually the biggest gainer in the Standard and Poors GSCI Index

Last month Arabica futures rallied 20 percent on the news that frost in the Brazilian growing areas would negatively affect next year’s crop. Coffee was actually the biggest gainer in the Standard and Poors GSCI Index, and the GSCI was down 1.7 percent! Arabica Coffee had more than doubled in price since June of 2010. Rain had cut the output from Colombia, the second largest producer. And according to the U.S.D.A; Coffee stockpiles in Brazil were at their third lowest level in fifty years.

But, now it’s time to say goodbye. Large output looms on the horizon. Brazil could produce as much as 3.78 million tonnes next season. That’s 63 million 60 kilo bags, a 35 percent gain over the last growing season. Central American Coffee growers are expected to reach production levels not seen in more than a decade. A Bloomberg survey of seven analysts resulted in a call for $2.50 a pound in the first quarter and $2.20 in the second.

Next season Brazil expects to produce more than 3.75 million tonnes of Robusta and Arabica Coffees. Colombian Coffee exports are expected to reach 8.5 million 60 kilo bags compared to 7.8 million this growing season. Honduras, Central America’s largest producer, expects output to rise 2.5 percent to 4.1 million bags. Guatemala will likely see output rise three to four percent to 3.6 million bags. Coffee is generally shipped in burlap bags placed in large steel boxes that can carry nineteen tonnes. The London based International Coffee Organization has said that global Coffee exports reached near 93.4 million bags in the 2010 – 2011 marketing year. How many steel boxes were required?

Technical Analysis is a methodology. The information below is not to be taken as trading advice or as a recommendation to buy or sell any commodity future or option. It may or may not agree with the fundamental analysis that appears above.

Weekly Technical Indications Thursday 9/8/2011: At this time the week’s trading range is 285.20-276.60, the last print is 283.80. The stochastic remains in buy mode. This week’s trading activity has again taken place above the center Bollinger band and 9 bar moving average. R.S.I. reads 60.35; lower than last week’s reading of 62.72. The M.A.C.D. histogram at 1.05 is lower than last week’s reading of 2.05. This market is on the cusp of a sizable move. Stay alert! A weekly close at or below 281.25 in December Coffee will turn the weekly trend down.