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Changing Landscape in the Coffee Market

May 25, 2022
8 min

Changing Landscape in the Coffee Market

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

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Russo-Ukraine Conflict and the Impact on Coffee (and Commodity) Markets

Feb 24, 2022
5 min

Russo-Ukraine Conflict and the Impact on Coffee (and Commodity) Markets

#Russia has begun aerial bombardment of #Ukraine, including in the capital city of Kiev this morning. What many had hoped (including me) would be a limited and bloodless territorial dispute is now looking like full-scale #war. As a military veteran of two wars, I do not speak lightly of the conflict, it will be devastating to those directly, and likely to seriously alter the global security dynamic that has existed since the end of WW2. However, my role is to offer insight

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Coffee Calendar Spreads are On Fire

Feb 1, 2022
7 min

Coffee Calendar Spreads are On Fire

Yesterday, #Arabica #certifiedstocks dropped an impressive 70k and the #calendarspreads are going bananas. Calendar spreads in Arabica #coffeemarket are notoriously boring (unlike #Robusta), and yet this year spreads have been ANYTHING BUT BORING. #Spec interest in the spreads has driven a lot of the #bullish #price action there but this has been instigated by some very real #fundamental concerns. In this article, we will look at what the calendar spreads are, why they refl

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The Bear Case for Coffee

Nov 1, 2021
5 min

The Bear Case for Coffee

The #Robusta spec position hit an all time high of 43% of OI and #Brazilian #farmers are reportedly holding back sales, referring to $2/lb as "low prices". I recognize the #bullish #fundamentals as much as anyone, however, I think the conversation has become a bit one-sided and so I think it is fair to consider the #bear's angle. Now with any good debate, you should start by acknowledging the strength of the opposing position. In this article, I will start with the bullish

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Coffee Report Focus #4: GCA Stocks

Oct 18, 2021
3 min

Coffee Report Focus #4: GCA Stocks

After last month's surprise GCA stocks report, many of us in the #coffee industry were watching closely this week's report, because the implications on price could be huge. What we saw was on the surface a relatively ho-hum number, but I would contend it was actually fairly #bearish. In the article that follows I explain how I interpret this report generally, and why this week's report was bearish for price. To explain the GCA stocks number from Friday, we will first look at

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What to Expect When Your Expecting (a Fed Press Release) *Coffee Market Edition*

Sep 22, 2021
3 min

What to Expect When Your Expecting (a Fed Press Release) *Coffee Market Edition*

In just a few short hours, the #FOMC (230pm EST) will be making a statement and the markets will be reacting. For people in the #coffee industry (and #commodities), what you need to know is that the overt expectation is for a #bullish #dollar which is #bearish #coffeefutures and commodities. However, that expectation may be subverted. I go over how that can happen below. The overt expectation is bullish the USD and bearish for coffee and commodities The basic relationship

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Robusta Inversion, Peak or Just Getting Started?

Sep 15, 2021
4 min

Robusta Inversion, Peak or Just Getting Started?

A few months back I wrote about the +22 inversion in #Robusta #coffeemarket and how that market gets "squeezed". Since then, the F/H more than doubled to a high of $67/MT. This is not simply a few trade houses "playing games" with the #stocks, but indicates some strong #fundamentals. I would argue that despite the impending #Vietnam crop, this #calendarspread still has #bullish fundamentals behind it and could even rally to new highs. Vietnam Before, I talk about why this c

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The Trade is Bullish (the Roaster is Not)

Sep 7, 2021
4 min

The Trade is Bullish (the Roaster is Not)

Like yin and yang, the Law of #Supply and the of Law of #Demand are complementary economic truths: When prices are high, supply increases. When prices are low, demand increases. This is normally reflected in the #COT. When prices rise we see the commercial short position rise and the commercial long position fall. Yet today things don't look quite that way: despite terminal prices of nearly 200 cents/lb, the Commercial short position is barely above average. Let's look at

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Coffee Report Focus #1: Seasonals

Aug 9, 2021
4 min

Coffee Report Focus #1: Seasonals

In my quest to offer you the best information and resources available on the coffee market, I will be doing doing a series of posts about the various #reports that we use to understand and predict the futures markets. For this first post, we are going to talk about #seasonals. Seasonals are one of the most useful reports that we can look at in the #coffeemarket because they follow a logic, and they are directly relevant to price, but they do have their limitations. Let's

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A Curious Coffee COT Report

Aug 4, 2021
3 min

A Curious Coffee COT Report

Last week's #COT contained a curious fact: during the rally up above 200 cents the #specs actually sold rather than bought. This is contrary to what we might expect and it confirms the possibility that the lows in this #coffeemarket will be much higher than previously thought. In the paragraphs that follow, I will provide the framework that I'm using to make this claim and then I will walk you through my logic. Please feel free to fact check me! For those unfamiliar with th

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Volatility and Inversion in the Calendar Spreads

Jul 27, 2021
3 min

Volatility and Inversion in the Calendar Spreads

The #Arabica #coffeemarket was inverted by 5 bps in N22/U22 as of 7:18am. This is VERY unusual. I'm not trying to be alarmist here, I just want to highlight that this is a unique time in the #coffee #markets. I will examine why this is unique below, but here is some context for those who are unfamiliar with market structure. Contango Market structure can be a bit daunting for those new to #commodities or coffee, but its one of the most essential concepts for #roasters, #me

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GCA Stocks vs KC Stocks Which Determines Price?

Jun 24, 2021
2 min

GCA Stocks vs KC Stocks Which Determines Price?

We have a fundamental disconnect between #CertStocks which are approaching the 5 year highs and #GCAstocks which are flirting with their 5 year lows. If the GCA stocks win out, then we are looking at a rather bullish market, if Certs win out then we are looking at a #bearish market. As someone who believes in #commodity #fundamentals, it is a basic premise that price is determined by the intersection of #SupplyAndDemand and stocks are #Supply in the present. #Demand we can

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Are Rate Hikes Coming? Does it Matter?

Jun 1, 2021
2 min

Are Rate Hikes Coming? Does it Matter?

#Currencies and #FX are notoriously difficult to predict because they do not exist in a vacuum, one #currency affects all others. That said, I'm cautious that #interestrate hikes are coming and that this will put some #bearish pressure on the #commodity #markets. As a #coffeemarket analyst, there's three factors here we need to consider: 1) will the #federalreserve raise interest rates? 2) will that appreciate the #USDollar? 3) will this put #bearish pressure on #commodities

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Half-Pregnant Coffee

May 26, 2021
1 min

Half-Pregnant Coffee

You can't be half-pregnant, but that is exactly how the #coffeemarket looks right now. The technicals are equal parts #bullish and #bearish. There is a strong uptrend but declining momentum. We have Bullish #triangle continuation and Bearish #doubletop forming. As is so often (frustratingly) the case in #TechnicalAnalysis, we need a #breakout confirmation to confirm the direction. This ambiguity confirms with the #Fundamentals at this point. There is a #bullish deficit th

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#Inflation Trade Overdone?

May 24, 2021
1 min

#Inflation Trade Overdone?

Given the outsized influence of the #macro bullishness on the #coffeemarket, it is important to revisit this topic. What's concerning to me here is that the #USdollar has continued to weaken, but many of the #commodities have come off quite a bit. Some of this is due to #bearish fundamental news (rains in #wheat for example), but given the synchronized move into a macro #bullish stance, I'm very cautious of a synchronized unwind. In particular, it seems clear to me that the #

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The Inverse Relationship between Stocks and Price

Apr 7, 2021
1 min

The Inverse Relationship between Stocks and Price

I have often remarked on the inverse correlation between price and #commodity inventory (stocks). In #coffeemarket the two most relevant stocks are the #GCA stocks (= USA unroasted #coffee) and the #certifiedstocks (tenderable to the exchange). As you can see from the graphic below, in some cases you can basically just invert the certified inventory to see a very basic price model (lower inventory = higher prices). However, while Certified stocks were rapidly increasing from

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