Good afternoon and wishes for a happy, healthy, and prosperous 2022 from us to you are being sent this afternoon.
Last week was a short week and short weeks have a way of exaggerating the volume that comes to it, though that was not so true this past week. Mostly consolidation was the play of the week. What’s been the tone of the last 3 weeks continued again this week and that is with momentum seemingly lost for now, long spec has been exiting some of their large long, though they are still standing with a large position.
Trade was fairly quiet as is usually the way in the week between Christmas and New Years with the holiday roasting done, roasters take some time and analyze where they stand, and what they’ll need moving forward for the new year.
The “next big thing” for coffee will be index rebalance from Jan 7 to the 13th. Indexes like the Bloomberg commodity index “rebalance” their positions as the new year starts. This generally means that these funds “declare victory” in the commodities that did well in 2021 and “re-invest” the money into commodities that under-performed, the thought being “it’s their turn to shine”. Folks we trust are saying they believe that this will result in about 22,000 lots of selling over the 5-day period. First reaction would be that this is a fair amount of selling that should be tough to get through, but this is nothing new and folks understand that coffee (who has been among the top 3 performers all year) would be one in place for a major re-balance. What this usually means over time is that there will be buyers, who knew this was coming and have delayed their own buying waiting for this action, to take up the first few days. In the past, it’s the last 2-3 days that are the toughest. With 22,000 lots or so, it will take a fair amount of buying to offset it.
As we go into 2022 many of the challenges of 2021 have carried through to the new year. As we’re catching up on our email this morning, we have shipments that were cancelled by steamship companies. In one instance a line had no containers to give to the shipper to facilitate the shipment. Logistics troubles remain in Colombia, Brazil, Africa, and Asia. We were advised by the one carrier we have going from those 4 areas to the West Coast of the USA and Canada that we should expect another rate hike adjustment any day now. This is really the biggest trouble in planning for buyers here in the USA and Canada. Knowing what the coffee costs to ship has been a major headache and it continues to 2022. Warehouses have just raised their costs as well. Interest rates are expected to go higher. And the futures market no longer allows carry offset. Most traders in responsible positions had not traded a market like this in their careers, or at least it was a long time ago. This year will be a major planning challenge for all in our industry.
The disaggregated COT issued yesterday owing to holiday schedules showed long funds long 56,047 lots long and 7,372 lots short, meaning the group sold for the week. Trade net/net did not do much at all in futures.
Stocks in ICE warehouses were 1,538,204 bags of which 699,087 bags were Brazil and 548,037 of the Brazil’s were in Antwerp. There are 6,700 bags pending grading.
We have some nice new arrivals into the warehouse over the last few days. Fresh Brazil 2/3 Scr 17/18 and RFA 2/3 MTGB, FTO Colombia and Colombia Supremo, Bali Kintamani has arrived but is not yet stripped, a very nice lot of FTO Sumatra is now in Continental. We have some RFA/Organic arriving on the 14th of December as well, and some wet/polished Vietnam Robusta are in store as well.
We’d love to help you.
All the best,
The Armenia Team