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Coffee Market - Weekly Review - November 20-24, 2017 *

The short week in the United States, due to the Thanksgiving holiday on Thursday and a cut in the financial markets session on Friday, did not prevent stock indexes from continuing to rise to make new highs even in the US market. The minutes of the last EDF meeting encouraged investors on the committee's dubious tone about maintaining the current level of inflation and the direction it might take if interest rates rise in December. The strongest effect was felt by the index of the dollar that slipped to the levels of end of September, returning force to the commodities, whose CRB index left a gap closing the week strong.

Coffee in New York closed basically unchanged compared to November 17 but tested $ 124.85 cents a pound on Monday and $ 130.65 cents on Friday.

The robusta, in London, has sunk a bit more and not to attract more fund sales needs to stay above $ 1,710 a ton in the last week of November.

New reports on production figures were released by the US Department of Agriculture, USDA, increasing by 100,000 bags the 17/18 crop of Colombia to 14.7 million bags and keeping unchanged that of Indonesia , in 10.9 million bags. For India, the federal agency estimated the harvest at 5.6 million bags, compared to 5.45 million in June.

The American organization mentioned the plan of the Colombian Coffee Federation to increase replanting in the country to reach a production of 18 million bags in a few years.
In Brazil the favorable climate has caused a quietude among some agents that before the rains were more frightened with the potential of recovery of the crop. Ironically in the international market it is said that when you do not hear the producers talk about the coffee plantations it is because everything is well, since when it is bad the choir is strong.

The demand for natural coffees, however, shows a need for coverage for the first half of 2018, in line with expectations and anxiety among traders. The lower availability of good coffees in the European spot compared to the American market, brings a more timid demand of the latter, while the steady Euro helps the towers of the old continent.

Cheap differences is not found, and only a firmer terminal can provide some encouragement to the basis, as the currencies of Brazil and Colombia have once again appreciated.

The short position of the Arabica funds traded at ICE is at record levels after the sharp drop in the number of outstanding contracts. The report of the CFTC to be released on Monday, due to the hanging of the holiday civilly given to public servants, should show the funds with a gross-selling position around 84 thousand contracts and the net close to 49 thousand lots, comfortable while the market falls below $ 133.75 cents, but potentially enough to raise volatility and prices to eventually $ 140.00 cents, in more accentuated coverage.

To do so, we need some positive reason for New York to rise, which fundamentally can only be expected if it is a strengthening of the Real or new purchases in commodities. The "C" contract can also be helped via an anticipation of the 10,000 contracts that the index funds will have to buy in the rebalancing of their portfolios in early 2018.
Other than that, it's hard to imagine anything more interesting to write these days.

A great week and good business at all,

Rodrigo Costa *

* Rodrigo CorrĂȘa da Costa writes this report on coffee weekly as a collaborator of Archer Consulting

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