Recent flooding in the coffee growing regions in Vietnam has been leading to some support for higher coffee futures prices. Growers in the Dak Lak province have been subject to very heavy rains over the last few weeks and another wet week is likely, with traders talking about impacts to the pending as well as the developing crop. The graph to the left is showing weekly rainfall totals for Nha Trang, which is approximately 60 miles east of Buon Ma Thuot, the provincial capital. The Weather Trends forecast has done well in predicting weekly rainfall totals (measured as a deviation from the same week of last year), missing the directional pattern in only two of the last 15 weeks; we expect between 4 and 5 inches of rain in the region for the current week ending 20Oct, and another 3+ inches for the week ending 27 Oct. But the thing to note is that we expect the pattern to be turning drier after that, and harvest of current crop can still get off to a good start, with only slight delays. Further, as more rain has come to Brazil’s growing regions, this will serve to exert more downward pressure on futures prices. As such, I am still bearish on coffee, for 1st through 3rd futures. Vietnam is a major player in the global coffee trade, and since the market has been bullish on the current Brazil news, any impacts to the Vietnamese crop could serve a price support. But with the weather outlook, we could see market sentiment changing. Currently, the coffee spot market is at 124.8 $USD/lb, down nearly 4% from yesterday’s close.

This entry was posted on Thursday, October 18th, 2007 at 11:46 am and is filed under Agriculture, Global Commodities, Global Weather, Softs. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.