Following oil rally, coffee tests again resistance on ICE US


The coffee market took advantage of the recent oil rally and the rise in the CRB index to advance on ICE US. WTI oil is trading above USD 86 a barrel, reflecting the supply cut and geopolitical issues. The hike in oil pushed the CRB index, which rose 1.16% only this Wednesday (19). Besides the surge in commodity prices, coffee also found support in the dollar’s low, especially against the real. The inverse correlation, which normally marks the price behavior of coffee and the US currency, ended up influencing the arabica gains in NY.

Although coffee showed strength to sustain gains and advance above the level of 240 cents, the March 2022 position failed to overcome important resistances and remains within a technically stable region. It lacks fundamental strength to overcome certain barriers.

The release of Conab’s first estimate for Brazil’s 2022 crop could be this new fact in the market. But the official number surprised positively. Conab estimated the 22/23 Brazilian crop at 55.75 million 60-kg bags, out of which 38.75 million bags of arabica and 17.00 million bags of conillon. The arabica crop, jeopardized by the significant cases of plant abortion, remained quite close to the private numbers. From the post-blossoming period, the estimate for the ​​arabica production has ranged between 38 and 40 million bags, which accounts for a cut of 10 to 12 million bags from the record output of 50 million bags reaped in 2020. By confirming the preliminary idea of ​​the market, Conab reduced the impact of blossoming abortion on the potential of the next arabica crop in Brazil.

The greatest distance in relation to the official number and private projections was in the case of conillon, since the indication in the post-blossoming, especially among industries and exporters, was a potential crop between 23 to 25 million bags in 2022. Conab’s conillon numbers have quite diverged from market projections (trading companies) for a while. So, the analysis focus is more concentrated on arabica. The reading is neutral, since Conab did not bring news, and the market had already priced this loss in production potential. In 2021, the second position of arabica on ICE US accumulated gains of 79%. Traders are now awaiting new indications on Brazil’s 2022 crop to confirm or adjust scenarios for 22/23.