The current Z/H #calendarspread has been inverted for an entire year (November 2021) and today, it touched a low of -2.6c and is currently trading @ -1.8c. The collapse of the inversion has been swift and violent, but more significantly, it opens the door for the final phase of the current Bear market in #coffee. What Happened and Why it Matters #Arabica is a market that is notoriously difficult to invert, which makes the 1 year long inversion all the more remarkable. However
The Brazilian presidential elections are happening and the question that arises for us is: how does this affect the #coffeemarket? In this article, we offer you a perspective on what to expect from Brazil’s political economic scenario. We outline the present situation, provide an outlook on what can potentially happen from now and how various developments might affect coffee prices and markets in general. Background For those unfamiliar, Brazil uses a 2-round voting system.
On Sep 1st, 2022 we spoke with Adilson Machado, the manager of Cocapec, one Brazil’s premier Coffee Coops. Adilson himself is deeply experienced in the coffee business (been with Cocapec for 13 years) and he brings a wealth of knowledge and practical expertise to his position. In the sections that follow, we cover some highlights from the interview. Adilson provided us his view on the Brazilian coffee market, expectations for weather, demand, the influence of macroeconomics,
The #coffeemarket is in a very different dynamic than it was 3 months ago, and we are getting near to a new paradigm: the bear market. In this article I will outline some of the warning signs that we are entering a bear market in #coffee and highlight some key data points to watch. I’ll also highlight 2 key areas that can change the #coffeefuturesmarket and return coffee to new highs. Still Some Life in this old Bull While it is time to look out for the bear market, we canno
The #USD directly impacts the price of #coffee (and all #commodities): Dollar strength lowers the prices of commodities and coffee, and dollar weakness increases prices. We looked at this in detail in our last Macro article. Therefor predicting the value of the dollar is an essential component of predicting coffee prices. In this article, we will first outline our case that #monetarypolicy is the primary driver of USD prices, then we will go through how the Fed’s dual mandat
#Coffee is both a financial product and a global #commodity. It is cultivated, consumed, shipped and traded across almost every country across the globe. Due to its global nature, the US #dollar performs an outsized role as a common #currency in the #trade of this product. Notably, the two primary #coffeefutures #markets (ICE Eur and ICE US), are priced in #USD. This makes understanding the purchasing power of the US dollar foundational to understanding the price of coffee.
Our first rule of our coffee trading rules is “Know Brazil, know the BRL”. #Brazil is the powerhouse of the #coffeemarket. Boasting the world’s largest #production of both #Arabica and #Robusta #coffee, anyone who wants to follow the coffee market needs to know what is happening in the world’s most important coffee origin. Brazilian coffee #farmers sell their coffee in local Brazilian Reais (plural of Real). This farmer selling is the primary reason that understanding the B
Today Fed Chairman Powell gave testimony before the US Senate where he cautioned on the economic impact of the #Omicron Variant on the US economy. This follows on the heels of the World Health Organization’s announcement on Friday that the new variant was a “cause for concern”. In this article, we discuss what the omicron variant is and what we can expect the impact to be on the macroeconomic environment and the coffee market. Background The omicron variant of the novel #co
#Coffee is a rapidly changing market and while conviction is essential, we need to be prepared to change our view when the facts change. Below are 7 data points to watch out for in coffee, when these become available, we should be prepared to change our minds. 1) GCA Stocks These are due out on the 15th, expectations are for a healthy draw down. The draw is expected seasonally and also from the wide annual deficit and logistical problems in shipment. Deviating from this exp
Yesterday the #BrazilianCentral Bank announced a rate increase of 1% to combat the rising #inflation. This is the largest increase since 2003 and is often seen as a sign of coming appreciation in the #BRL and combined with the some indications of weakness in the #USD could be a portent of strength in the #coffeemarket. Let's break that down. In the sections that follow, I show a) some background on why these #currencies are relevant to the #coffee market and b) how I think
I read the Federal Reserve minutes so you don't have to! Steady as she goes from the #FederalReserve. This may disappoint #USD bulls who were expecting some fireworks or change in policy. As those of us who follow coffee know, a bullish USD is bearish commodities and so the recent rally in the #Dollar has weighed on #coffee prices. If that bullishness was misguided then we could see #commodities and the #coffeemarket pick back up. The core themes of the report were that #i
Another big day in the #CoffeeMarkets this time spurred by two pieces of news: 1) Brazilian gov't is issuing water advisories in several states including Parana, Sao Paolo and Minas which is a huge portion of the global supply of #coffee. 2) A warehouse shutting down in SP, Brazil due to #Covid. The best and strongest #bullmarkets are when the #Fundamentals, #Technicals, #Positioning, #Seasonality, #Weather and #Macro all align and it is time to consider that that is what is
Well the Macro picture has once again raised its ugly head.
#Federalreserve Vice Chair Clarida said the weak April payroll report shows "we have not made substantial further progress" on the Fed's goals for employment. This was not unexpected, many pundits had said as much given the data (and our poll suggested the same), but putting voice to the sentiment moved the #currencymarkets. Overnight, #FX traders sold off the dollar and this morning #Coffeetraders decided to have
The back month calendar spreads are firm. U22/Z22 is backwardated as of this writing and H22/K22, K22/N22, N22/U22, are all > -1 and flirting with inversion as well. However, the driver here is a bit opaque. We often hear in #coffeemarket that Calendar Spreads are one of the purest manifestations of fundamentals. The logic being that the long and short nature of the spread removes a lot of the noise from the macro picture (see correlation with #BCOM, #USD and #BRL). Moreo