Good morning and happy chilly Monday.
It’s in the 30’s here, finally. Autumn is cycling into Winter now. Prime hot coffee season. Want to share some of this organic blend we’re drinking this morning?
It was the best of times, it was the worst of times… At least considering what we’ve had lately. The market continued on it’s downward trend making a new low down to 163.65 in Dec, where the market finally seemed to find some stronger, more aggressive buying and it based there and made what now appears to be a corrective move Thursday and Friday to get up in the 170’s. The RSI moved back above 30 but this morning’s action has us threatening that level again.
Owing to the Veterans Day holiday here, we didn’t get the commitment of traders report (which we believe will show more fund based selling when it comes out tonight), but what we did get that seems to be market moving today, is the ICE warehouse stocks report. Continued gradings there has brought the total back up to 454,056 bags but what is more important, is that there are now 456,133 bags pending grading in Antwerp. The index roll brought the Dec/Mar switch back to +200 points and this morningwe’re out of backwardation and back to contango, by 5 points, but it’s a start if nothing else.
In the news, Brazil’s coffee exports fell 3.2% in October from the same time a year earlier to 3.47 million bags. Cecafe cited the same problems; available containers, congested ships and high costs hindering shipments.
In the macro, inflation numbers here in the USA seem to be moderating, making some hopeful that the next Fed move will be something closer to 50 basis points. That also helped the move higher at the end of last week.
Brazil Real is weaker than this time last week at 5.2682 but the Colombia Peso is stronger at 4805.5
Close below 163.00 would probably be very bearish for the coffee market though the funds are already fairly well extended on the short side at the moment. We continue to believe the market is overdue for a substantial correction, but it continues to confound us when that will happen.
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All the best,
The Armenia Team