Is the bull market about to end for Arabica and Robusta Coffee?

Coffee - Coffee beans in canvas sack by Bragin Alexey via Shutterstock

Spread Edge Capital specializes in seasonal spread trading across a wide variety of commodity markets. A spread trade is the simultaneous purchase and sale of the same commodity with different delivery dates.  SpreadEdge publishes a weekly Newsletter that provides several seasonal spread trade opportunities every week.

Overview

Each week the SpreadEdge Newsletter documents an extensive list of seasonal, technical and fundamental indicators for the various commodity markets.  This article I will focus on the Coffee markets and review the month-to-date price action, relative price and positioning, and the daily and monthly charts.  Each of these indicators will be reviewed in the following sections.

Month-to-date Closing Prices

Closing prices for last Friday 10/11 compared to the last trading day of September.  Expiration months are roll adjusted.

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  • For the month, Coffee prices have fallen (12.2%) for Robusta and (6.7%) for Arabica Coffee.  Only Soybean Meal (8.1%) has fallen near this magnitude.

Relative Price and Positioning

Relative Positioning – Oversold versus Overbought on the horizontal axis.  COT current net position compared to the COT data over the past 24 months.
Relative Price - Cheap versus Expensive on the vertical axis.  A comparison of the front month current price compared to the front month price over the past 24 months.  
 

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  • Despite the large drops in price, Robusta and Arabica Coffee remain amongst the most “Expensive and Overbought” markets within the agriculture complex.  In fact, Arabica Coffee has been in this quadrant since March of 2024 (39 weeks) while Robusta Coffee has been in this quadrant since February, 2023 (87 weeks).

Technical Analysis

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  • On a daily chart, both Arabica and Robusta Coffee are currently very near the bottom of the upward channel.  Each have bounced higher from this channel in the past year, but it is unclear that this support level will hold this time.
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  • On a monthly chart that goes back prior to 2008, we see a very different picture between Arabica and Robusta Coffee.  Note that Arabica is still trading below the 300+ level from May of 2011 while Robusta Coffee recently traded nearly 2x the highest level in early 2008.  Note also that the candle for Robusta Coffee in October has currently formed a bearish engulfing pattern.  There is still lots of time left in the month, but this candle pattern is especially bearish and could signal a big decline from current prices.


More Information

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The SpreadEdge Weekly Newsletter is published every weekend and provides a broad overview of the important seasonal, technical, and fundamental indicators within the Energy, Grains, Meats, Softs, Metals and Currency markets.  In addition, spread trade recommendations and follow-up on open trades is also provided.  For a free copy of the Weekly Newsletter, please send an email to info@SpreadEdgeCapital.com

Darren Carlat

SpreadEdge Capital, LLC

(214) 636-3133

Darren@SpreadEdgeCapital.com

www.SpreadEdgeCapital.com

Disclaimer

SpreadEdge Capital, LLC is registered as a Commodity Trading Advisor with the Commodity Futures Trading Commission and is an NFA member. Past performance is not indicative of future results. Futures trading is not suitable for all investors, The risk associated with futures trading is substantial. Only risk capital should be used for these investments because you can lose more than your original investment. This is not a solicitation.


On the date of publication, Darren Carlat had a position in: RMF25 . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.