Coffee Traders' Forum - A Discussion about Coffee Futures Trading
Coffee Traders Discussion Forum
Excluding a weather type supply shock, certain agricultural commodity prices may not firm or reverse until farmers in developing countries stop increasing production as a way out of their poverty cycle. The excess production beyond demand has weighed heavily on prices and extended the poverty cycle. The record high fund short positions in coffee, corn and wheat are explosive, but they are unlikely to trigger a reversal until the funds overstay their position in the face of new supply and or demand dynamics. That may be happening in sugar and particularly corn now, but no sign of it yet in cocoa or coffee. In short, hard working and productive small farmers have produced their way to a continued cycle of poverty. In spite of all the sustainable propaganda, hard to believe the large distributors and or users want to change that. Indeed, does Starbucks or Nestle really want to pay more for raw material? Paired with serious leverage, dirt cheap commodity prices, low cost options and record net fund short positions are, however, the stuff bullish dreams are made of. Conspiracy theories about production, low prices per se and or futures being wrong are unlikely to generate a reversal. Given the steady increase in yields, global warming falls in the same boat. Anything can happen and futures generally do the unexpected. WATCH THAT MOMENTUM. Suck up the false reversals and stay with it. Like Mick Jagger said, "What else can a poor boy do in sleepy London town."