The basis for the rally in the coffee market is that this year is an off year for coffee production in Brazil. There will definitely be lower production for this year’s crop in Brazil, so higher prices are likely warranted. Many traders were wary of the demand side of the equation just a few months ago, but coffee prices have been on a steady upward movement since mid-March.
A breakout above $1.31 a pound for coffee futures should look very positive. July futures closed at $1.2940 on Monday, so a breakout could happen soon. I like playing the upside on a breakout above $1.31. Taking a quick profit on one contract and letting another contract run looks like a good strategy for futures traders. A stop-loss below $1.25 is the logical place to control potential losses.