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Coffee Is Unimpressed

The risk of great expectations is great disappointments.

Initial assessments are that the much ballyhooed 2nd (technically 3rd) frost of 2021 did not cause significant damage, or at least, not as much as feared.

It is still too early to make long term judgments but the market specializes in rapidly assessing risk and adjusting as the information arrives. The market opened sharply higher and then sold off early with 2 large volume spikes that brought the market 10c lower and we have largely traded around that level since.

Its hard to be bearish when we have just had the worst frost since 1994 followed by a second smaller frost but its not exactly the coffeepocalypse that was predicted either.

I'm reminded that after the July 20th frost, initial assessments were a few hundred thousand bags, than several hundred thousand, then 1-2 million, then 3-5 million and have largely coalesced around 4 million (with Marex circulating a document assessing 7-9 millionb yesterday). So perhaps the market will decide that the damage is worse than it right now. Time will tell.

What does seem certain is that there was SOME frost, it just wasn't ENOUGH frost to scare the market higher. Should we be 10-11c lower than yesterday? Perhaps, but there are still many bulls out there. Remember that there were analysts warning of $2 coffee before a frost was even in the forecast. At some point, the market will look cheap and we will see buyers again.

Meanwhile, there is more frost in the forecast tonight. Not as strongly nor as widespread as last night, but its there and the market does not care one whit about it at the moment.

I think of all of us in the business are a bit exhausted of frost and looking forward to the weekend and maybe some semblance of returning to business as usual on Monday.

Meanwhile, while no one was watching, Fed Chairman Powell casually acknowledged that inflation was larger and more persistent than expected, but still just transitory!

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I agree with your conclusion - I'll be careful as there may be more volatility rather than a calming of the waters in August. It looks like the polar front did go through MG and the extent of the damage is yet to become clear. For example, see for a MG farmer walking about a farm and capturing shots of neighbouring fields (turn on subtitles translation into English if you don't speak the language). The last price spike was in some part due to the news cycle highlighting an agency official who's an agricultural expert saying he'd never seen such damage, 20-30% of crop affected, etc. But it seems a/ frost did happen on 31 Jul too; b/ it…

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