In a remarkable turnabout, coffee futures have become the commodity trading vehicle of choice for a growing number of managed funds. Indeed, its increasing popularity has given coffee prices a much-needed dose of price momentum, making it one of this summer’s hottest commodities. But a growing body of data suggests that the bulls won’t be able to maintain control of the java market much longer. Here we’ll review the fundamental and technical evidence which points to potentially lower prices ahead.
A major catalyst behind coffee’s recent price gains is the growing number of hedge funds playing the long side of the market. This can be clearly discerned in the latest Commitments of Traders (COT) reports from the CFTC. It shows that non-commercial traders (including hedge funds and institutions) have dramatically increased their long positions in coffee futures in recent weeks, while covering prior short positions.
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