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1-17-2023 Armenia Coffee Report

Good morning,

It’s a bit chilly here today. Time for a hot, black winter coffee of choice. For me, Colombia, medium roast.

What a week it was. What was supposed to be a week highlighted by index fund rebalancing was instead a week dominated by options expiration and fund selling. A lot of fund selling.

The commitment of traders report issued on Friday Jan 13 for trading as of Tuesday Jan 10 showed long fund sold 3,452 lots and short fund sold a massive 13,147 lots. That’s as of Tuesday there was probably more on their part Wednesday and Thursday. Short fund is now a whopping 53,740 lots short, a HUGE number. It seems to be fueled by thoughts that food inflation is nearing it’s end and that coffee has few challenges but that’s far from the truth as we know it. It’s going to be interesting to watch them unwind such a position. Trade was the offset to the large selling, with roasters taking back a large coverage position. Origin has not been selling for the most part, especially the larger origins.

ICE warehouse stocks stood at 850,724 as of Friday. There were 139,161 bags pending grading. It is worth noting that a fair amount of the recent gradings have been failing.

Brazilian Real continues is recent strong run showing at 5.11858 and the Colombian Peso stands 4691 at the moment.

The market made it as low as about 142.00 and there lies support for the moment. Resistance in the low 160’s for the moment then 175. Funds can keep the pressure on, there’s no doubt about it. They don’t seem as concerned as they used to be about being a large percentage of the open interest as is evidenced by their current position. Their unwinding should prompt a decent run higher from some point that isn’t here.

Our friends at Sigri estate have some nice B’s they are looking for homes for. Can we be of help today?

All the best,
The Armenia Team