Coffee Traders' Forum - A Discussion about Coffee Futures Trading
Coffee Traders Discussion Forum
Latin American row crop weather remains concerning along with other key global growing areas.
With little change in the forecast, Argentina is deluged with excessive rain while Central Brazil suffers from an extreme lack of moisture.
Brazil’s wet season has ended and given the high pressure Ridge across central Brazil, a serious loss in soil moisture is likely in the next few weeks.
Don’t know how this will impact Brazil’s Coffee crop, but it is quite serious for Brazil’s second corn crop and the Argentine soy crop still in the field which is estimated to be in excess of 30%. It has also precluded winter wheat seeding in Argentina and bolstered world prices.
The U.S., Canada, Argentina, Australia, Black Sea, Russian and Ukraine are all at risk for adverse weather. Long viewed as having the most burdensome stocks, world wheat prices have just zoomed to a multi-year high. That did not happen without a rapid change in dynamics. As noted many times, commodity cycles can turn on a dime. A top in equities, higher rates and the return of inflation are other dynamics attracting money to commodities.
Given the power of mother nature, the upcoming winter in Brazil should be monitored closely. Observers seem to be dismissing it this year. With the producers as well as the state out of stock and the exporters short, the big picture sentiment could change quickly. Looking at it another way, those 50,000 net fund shorts could not only cover, but reverse. That cycle happens over and over. Indeed, it happened twice in grains over the last year. Cocoa position also reversed from net 52,000 short to net 55,000 long in the last year.
The lack of bullish enthusiasm for NY KC is also quite telling. Those who missed the rally can spin it anyway they want, but the price action is not bearish. Indeed, it feels kinetic.