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*The Commodities vs Coffee*

"When all you have is a hammer, all of your problems look like nails."


As a "coffee guy" or "coffee gal", it can be very easy to get stuck in our worlds and lose sight of the big picture. For those of us who are immersed in #coffee market data and talk about the #coffeemarket on a daily basis, we tend to see everything in terms of coffee. When you publicly share a view of the #market, it is even more tempting to look at every day's price action as confirmation of our view.


So it is important to take a step out of our world and take a look at the big picture to prove the "null hypothesis": the possibility that your view has absolutely nothing to do with going on.


This is the case today with coffee. I have a bullish view of 21/22 basis the deficit and the off-cycle Brazilian coffee crop. However, just because the market is rallying, doesn't mean that I'm right (nor does it mean I'm wrong).


Last week's price action jarred me out of that view because the market seemingly rallied 10c on nothing.


I had been hearing about rallies in #Corn, #Wheat, #Lumber, #Copper and #Soy so I looked up those along with Coffee and low and behold they have all rallied, especially in April/May.


The one piece of evidence that struck me as most compelling for last week's rally was not the #drought, not a strike in #Colombia, it was an unscripted comment by US Treasury Secretary #Yellen a day earlier, that rates may need to be raised to address inflation. A comment that was later walked back.


FILE - This Dec. 13, 2017, file photo shows Federal Reserve Chair Janet Yellen speaking during a news conference following the Federal Open Market Committee meeting in Washington. Treasury Secretary Janet Yellen said Friday, March 5, 2021 that despite the strong job gains last month, Congress still needs to “go big” by passing President Joe Biden's $1.9 trillion relief package to get millions of people back to work sooner. (AP Photo/Carolyn Kaster, File)

#Commodities move in cycles of boom and busts corresponding to some degree to the business cycle. If right now we are in the midst of the worst global economic #recession since the Great Depression and we are printing money like its going out of style, it stands to reason that increased #demand and #inflation both could be fueling this #commodity boom.


If that happens, maybe the #coffeefundamentals are just window dressing on this rally.

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