Credit Suisse Revises Down 3 Month And 2012 Coffee Forecasts

Credit Suisse (CS) has revised lower its near-term pricing forecasts for coffee, citing a large 2012-13 crop from top producer Brazil amid weaker consumption of mild variety beans.

The bank forecast coffee prices this quarter will likely average $1.90/lb and average $1.80/lb in the year, revising lower its prior forecasts.

The bank attributed the recent price weakness in the coffee market to a growing consensus among investors that the 2012-13 Brazil coffee crop will probably ease market tightness, as 2012 is an on-year for Brazilian arabica coffee plants. This is the year of the large harvest in the coffee trees' natural alternating high and low output years.

Credit Suisse said that weather conditions have improved since last quarter, adding further downside to coffee prices amid weaker consumption of milder varieties.

Still, the bank said it expects the coffee market's physical tightness to continue until the start of Brazil's harvest, but after that downward pressure will likely intensify.

Technical indicators also point to a downwards correction.

"After the recent correction, both momentum and trend indicators are now negative. The U.S. 200-cent mark has been proving good support for now. If broken, however, the move would likely indicate a new down leg," the bank said.

"Given the weakening fundamental backdrop, we think prices should start converging towards our fair value range in the long run," the bank added.

From: Foxbusiness.com