Updated: May 6, 2021
We have been talking about the "macro" trade recently with the entire #commoditymarket getting a boost from the weak #USdollar and fundamentals in the #Ags. Today the #markets are taking a bit of a breather and #coffeemarket is no exception.
The #BRL firmed hard though, ~2% on the day and this is supportive for #Coffee. With KC closing above that 145 resistance level (which is technically significant) and BRL doing a lot of its move after KC's close, Coffee is in a very strong position for tomorrow.
Even without the #fundamentals this would put coffee in a very strong position, but the bulls will undoubtedly be talking about how this was inevitable because of the damage to the #Brazil 21/22 crop.
I would agree with the Bulls, I follow the fundamentals and I have it on good authority that the crop will be down +30%. However, I am also extremely cautious here, the kind of rally that Coffee has ridden so far means #volatility is the order of the day, and when 5c moves up become expected, 5c moves down are inevitable.
The time for tightness in the balance sheet is not here yet in my opinion. In fact, with the Brazil crop approaching Harvest this is likely to be the calm before the stotm. Any rallying today is in anticipation of future tightness, and/or related to #technicals and macro, but it is not because of a current supply problem.
If the #deficit is as bad as they say, then the pinch should be felt most acutely next year, just before the 22/23 Brazil crop.