For the second time this month, coffee prices have had bearish reports printed from the USDA Foreign Ag Service. Yesterday the FAS reported that Honduras’ coffee production is expected to grow to 7.2 million 60-kg bags in the 22/23 marketing year. Earlier this month USDA FAS posted their annual Brazil Coffee update that projected that Brazil’s coffee production is expected to increase by 3.8 million bags.
Below is a clip from the report prepared by Juan Fiallos from the June 12th, Honduras annual coffee update.
Report Highlights: Honduras coffee production is expected to reach 7.2 million 60-kilogram bags in the marketing year 2022- 23, a thirty-three percent increase from the previous year. Favorable weather conditions with more and better rain distribution and a lower incidence of leaf rust and coffee drill bit are expected to improve coffee production. COVID-19 incidence has decreased in Honduras, and post-hurricane coffee farms rehabilitation and farm renewal efforts have been implemented. Consequently, MY2022/23 export forecast is 5.5 million bags, up 8% vs. MY2021/22.
Coffee represents 30% of the agriculture GDP of Honduras and about 5% of the overall GDP. In 2022 Honduras was the world’s 8th largest coffee producer, following Brazil, Vietnam, Colombia, Indonesia, Ethiopia, Uganda, and India. Honduras Produces Arabica coffee beans.
The July futures contract for Coffee closed today down 1.51% and settled below the 50-day moving average and above the 100-day and 200-day moving averages. From the high made last Friday morning, coffee futures are down nearly 7%. Last week Thursday and Friday were the highest prices for coffee since April. If the Bulls want to keep the uptrend in tack, they must avoid spending too much time below the 200-day and, better yet avoid breaking last week’s low at 179.35.
The 100-day is above the 200-day for the first time since last summer, and the 50-day is above both the 100-day and the 200-day and is pointed higher. The bulls still have a few technicals on their side, but and the end of the day, price action trumps everything else, and this week the price action has been favoring the bears.
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