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6-19-2023 Armenia Coffee Report

Happy Monday to all,

Today is a federal and state holiday here but ourselves and Continental Warehouse are open, some others along the way. No C market, no banks. Since we missed last Monday we’ll try and cover all we missed over the last 2 weeks.

Again, the market worked to make new recent highs up to 19660 in July, where once again, origin was a good seller. Roaster based buying was involved in the move higher as was some option plays with expiry that Friday. As that support went away and the selling got heavier the market went back to tried and true support down by the 200 day moving average just above 18100 and we went home for the long weekend sideways from there. The dollar was weaker throughout the end of the week as the USA got some welcomed inflation news and the Fed announced it would take a break on rate hikes, for now, but said they reserved the right to go back to hikes quickly should they feel it is warranted.

Last week’s COT was about as much of a push as we’ve ever seen. This weeks was not much
different. Long funds bought 921 lots to stand at 33,311 lots long while short funds bought only 165 lots to stand at 17,260. Trade was the seller of that 1000 lots.

The currency markets are open and the Brazilian Real is standing at 4.80097 about as strong as we have seen in a long while. Colombia’s Peso is also strong standing at 4167.6. ICE warehouse stocks stand at their lowest level of the year at 545,327 bags. The pace of removals has slowed recently and there are 11,547 bags pending grading.

A Bloomberg story said: The world’s biggest coffee makers are delaying bean purchases from top grower Brazil as they use up stockpiles accumulated during the pandemic and wait for prices to fall. Almost on cue, Brazil’s Cecafe announced they shipped 2.1 million bags of coffee in May 2023, 20.4% less than a year earlier. This was blamed on the delayed harvest and lower reserves from the previous crop.

The market is at a bit of a crossroads here. July is about to go into notice period up over 4 cents on next month Sept, which is 2 cents up on next month Dec, which is even with next year’s March, so it appears the market is expecting coffee to come to it over the next few months, to the point that maybe just maybe we’ll escape the backwardation we’ve been living with and head back to contango we’re more accustomed to living with. Time will tell. We expect support 18000 down to 17500 and overhead resistance at 20000. Its been successful to trade in front of these numbers, so far. How can we be of help today?

All the best,
The Armenia Team