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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 washed #Brazil’s imports, the GCA stocks were rapidly declining due to seasonal flows. This made for competing #bullish and #bearish pressures on #kc.


Going forward we would expect GCA stocks to increase from the coming Brazil crop (harvests begin April/May) but less than usual because of the smaller crop.