Good morning and happy middle of summer Monday morning to all. It’s still very warm here and we have the ice machine cranked up and ready to go.
A very interesting week. The market worked steadily higher each day, fueled by cooler weather for the coming week in Brazil, and a chart that crossed over into bullish territory after a good move lower that allowed roasters to catch up some on their pricing.
Very interesting COT issued on Friday for trading as of Tuesday July 13th showed that long funds SOLD 4564 lots to be 51819 lots long while short funds BOUGHT 1972 lots to be 23,798 lots short. I capitalized the activity to highlight that both sides didn’t really like their positioning and lightened up some, longs especially so. Trade (Roasters) were the biggest buyers taking just over 5000 lots. Since Tuesday, market continued to work higher, a lot of that buying was spurred by the weather talk, cold but not frost expected.
The Brazilian Real stabilized quite a bit last week and stands at 5.17591 this morning, stronger vs the dollar by 1.13% Colombia peso is at 3822.8
This morning, weather reports tempered somewhat have weather longs exiting again, but the market held, roughly, the 21-day moving average which we find as keeping the bull trend for now.
Last week we heard the first reports of defaults at origin occurring. Producers who sold coffee forward into what they thought would be high levels, saw the market continue to go even higher. Our old friend Bob T used to say that everyone, even the best intentioned, had a number where they look at where they sold, and where they can sell now and make the decision on what they are going to do. Some are stronger willed and more ethical than others. Has ever been thus in the coffee market, and human nature. Two origins told us producers did not deliver what they had previously contracted for, meaning they had to go into the market to fulfill the obligations they thought were already filled. Likely booking losses equal to the gains the defaulters obtained, and likely a bit more. Now, imagine if we had a frost market….((shivers)). From here we’ll see how much of the recent rally was on cold weather. We’d like to see the market hold that 21 day moving average to keep working higher.
We have some nice women’s centered FT/Organic Colombia that should be in the warehouse soon. We have some fresh Excelso just arrived, has to be picked up and stripped. We have some RFA SHB Guatemala just into the warehouse, cup really nicely, as do some RFA SHG Honduras we recently moved into Continental as well. We’re down to about 100 bags of Sumatra Mandheling and it will be some time before we can replace them.
All the best,
The Armenia Team