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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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Technical Studies #1: Using the RSI for Coffee Trading

Dec 1, 2021
3 min

Technical Studies #1: Using the RSI for Coffee Trading

One of the most useful #TechnicalAnalysis indicators for #commodities in general, and the #coffeemarket in particular, is the Relative Strength Index (RSI). In this article, we will discuss what this indicator is, how it is constructed, and how it is interpreted when reviewing the #market. If you are interested in learning more about technical analysis, this indicator (along with many others) are taught in detail as part Day 3 of the Coffee Trader's Course. Why should you ca

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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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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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The Struggle for $2 Coffee, Comparison with 2014

Sep 2, 2021
3 min

The Struggle for $2 Coffee, Comparison with 2014

4 days in a row now #CoffeeMarket has tried and failed to break the psychologically significant 200 level. Back in 2014 #coffeefutures crossed $2 dozens of times before finally collapsing and ushering in a 1 year bear market which despite a reprieve in 2016 then continued into 2019. As a twitter friend said "No two patterns are alike, but they're unfolding very similar[ly]." Let's be real: with the worst #frost in a generation, a #drought, and dry forecast for next 4 weeks,

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GCA Stocks Return to Seasonal Expectations, Confirms Deficit

Aug 16, 2021
3 min

GCA Stocks Return to Seasonal Expectations, Confirms Deficit

Last month the #GCAstocks, shocked to the downside when they came in below expectations at 5.78 mm bags. This month, we have a substantial stock increase to 6.07 mm bags which essentially undoes the short term fear from last month's low number, but longer term only confirms the #deficit. In the paragraphs that follow, I outline this logic, explain how to read this report and why I believe it confirms the deficit. The #GCA #coffee stocks are published by the nonprofit Green

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Brazil Coffee: A Little Dry, or Very Dry?

Aug 12, 2021
3 min

Brazil Coffee: A Little Dry, or Very Dry?

For the past several weeks and months we have been hearing about #drought and #dryness in Brazil (from our friends like analysts Judy Ganes, Mike Nugent, the Analyst-Trader, and President of MJ Nugent Co. , and others). How dry is it, and is it a source of concern? My view is that it is not a strong concern now, but that there is potential for a bigger problem and I highlight what that is and why in the paragraphs that follow. Background: 21/22 is a significant #deficit yea

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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 Macro Boon for Coffee

Aug 5, 2021
5 min

A Macro Boon for Coffee

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

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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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Bad to Worse: Frost Update 7/22/2021

Jul 22, 2021
4 min

Bad to Worse: Frost Update 7/22/2021

In my post from a few days ago, I said that the extent of the damage was not yet known. In the two days since then, the situation has gone from bad to worse. This is now likely the worst #frost in #Brazil since 1994, and it came at a time when the market cannot afford to lose the #production. Initial estimates from the July 19th/20th frost was 1 - 2 million bags lost. Now, the estimates have more than doubled to 3 - 5 million. In the paragraphs that follow, I am going to

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Tis the Silly Season

Jun 21, 2021
1 min

Tis the Silly Season

We have now officially entered the #SillySeason as we prepare for potential #Frosts in #Brazil. According to my #Seasonality report, this is the most #bullish 6 weeks of the year for #Arabica#coffee. Robusta is slightly less bullish here according to the Seasonal (3rd most bullish week for #Robusta), but still quite bullish. Worth noting a few things: 1) that there is no Frost in the forecast as of yet. Over the next two weeks both the US and Canadian models are not showing a

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The Doomsday and Mini-Doomsday Inflation Scenarios

Jun 20, 2021
3 min

The Doomsday and Mini-Doomsday Inflation Scenarios

The #FederalReserve's #FOMC met this past week, and the results are relevant to us in the #coffeemarket, and indeed all of the #commodities. There were two big takeaways from the communications last week that were somewhat contrary, but the market interpreted them as #bullish the #USdollar. I think that bullishness may be unwarranted in a small way (the mini-doomsday scenario) and also I want to highlight what the Big Risks are here (the doomsday scenario). First, I'll recou

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Who's the Smart Money Here?

Jun 9, 2021
2 min

Who's the Smart Money Here?

The #coffeemarket has been consolidating for the last two weeks after its rapid rise up since the beginning of April. The question now is where to from here? And I think the price action for the last few days has been telling. My suspicion is that #coffeeRoasters are using this opportunity to add to their longs now that we have come off of the highs. My logic is what I would describe as "contrary" morning price action. For the last few days we have been seeing buying in th

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Bearish Specs Appear

Jun 3, 2021
2 min

Bearish Specs Appear

Over the last few days we have seen the new highs fail and fall along with the #bullish excitement. Meanwhile we have seen #openinterest rise 4k over the same period, the strongest two day increase since early May. The shorthand interpretation of OI is that increases of OI on down-market days mean new Spec Shorts and in this case it seems plausible. I have been hearing 2 common refrains that support this: 1) "the Brazilian #farmer is not selling (much) despite excellent pri

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*Is the Rally Here?*

May 28, 2021
3 min

*Is the Rally Here?*

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

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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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