Coffee Traders' Forum - A Discussion about Coffee Futures Trading

Coffee Traders Discussion Forum

Coffee Traders' Forum

ARTICLE - Rodrigo Costa


Coffee Market - Weekly Review - from 02 to 06 April 2018 *

The stock market has experienced days of volatility aided by President Donald Trump's mercurial statements, which via twitter and speeches influence investors' positioning in the short-term.

New China retaliations against the United States threatening to charge tariffs on American soybeans, cotton and chemicals, among others, caused a sharp drop in commodity indices during the week.

The dollar yielded on Friday after job creation in America was lower than expected in March, but the Brazilian real devalued, ending at the lowest level in a year.

Perhaps the sad episode of seeing one sentenced by Brazilian justice defying and mocking one of the essential powers to ensure a democracy may have frightened the capital of those who are not accustomed to seeing such disrespect for order - which probably happens daily, but is being demonstrated at through the bad example given by former president Luis Inácio Lula da Silva.

Coffee in New York has made a new low, but daily swings continue to be much smaller than it was once one of the most volatile contracts traded on the stock market, recently losing even for the S & P500's moves.

The failure of New York to work above the twenty-day moving average attracted new speculator sales, taking the funds to a new record for gross and net sales (sounds like scratchy disc, I know). The proximity of the mobile averages, however, leaves a greater possibility of a coverage of those sold, which with the weakest currency can help increase the flow of coffee in the physical and a possible moderate widening of differentials.

On the eve of the entrance of the conilon crop the price of the variety seems to have found a floor. Difficult to say if the "floor" is provisional, even more so after the decrease of the minimum price adjusted by the Ministry of Agriculture from R $ 223.59 to R $ 202.19 a bag. By the way, the agency raised the minimum Arabica price from R $ 333.03 to R $ 341.21, values ​​that, at least today, in practice only give base for the financing of the product.

A multinational trading company, Volcafé (of the ED & F Man group) released its estimate for the Brazilian crop of 18/19 in 61.8 million bags, 44.2 million arabica and 17.6 million conilon). The group also points to a Vietnamese production of 30.6 million bags, numbers that together generate a surplus after 17/18 the deficit has reached 8.4 million bags - a figure that varies among those who think it was a small surplus to this of the respected house.

There is some doubt about the potential of production in Vietnam, for climatic reasons and also of a lower than desirable remuneration in the country.

Meanwhile, stocks at destination slow the pace of use, as demonstrated by the symbolic drop of 34,833 bags in February in Japan, totaling 2,972,600 bags at the end of the month. The certificates also remain close to 2 million bags in arabica and 1.3 million robusta.

An interesting piece of data, from a study presented by the National Coffee Association, shows that 64% of American consumers drink coffee daily, the highest level since 2012. Another, US imports, shows a smaller volume in the last 12 months, 25.22 million bags , compared to 25.69 million in the previous year - offset by the use of inventories, that is, does not mean that consumption fell.

News that has gone unnoticed is worrying depending on the unfolding: in California a judge requires that a notice be placed on cafes sold in the state saying that the drink contains a carcinogen, a debatable thesis, but that may scare some drinkers - the National Association (NCA) is aware and has always been active against theories that are not scientifically proven, as well as defended, presented and guaranteed studies that proved to be the beneficial drink when consumed moderately.

In the ICO, the United States' exit from the international coffee agreement may not be as important in practice, but it happens at an uncomfortable time for producers, meaning timing is not the best.

The roll of position for those who do not want to receive or deliver coffee in the bag began, with swollen volumes and the spread signing. Technically New York will find repurchases above $ 120.35 cents per pound, and below $ 115.50 cents may encourage a new round of fund selling.

A great week and very good business at all.

Rodrigo Costa *

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