Commodity-market-review

Weekly coffee market 11/16/2020.

ICEUS:KC1!   COFFEE C® FUTURES
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TECHNICAL ANALYSIS OF ARABICA COFFEE

Last week, ICE US coffee futures closed higher at 112.20 ct / lb .
Hopes for a vaccine are fuelling the markets, Moderna announced on Monday very encouraging results. The pandemic continues unabated, we have just surpassed 54 million cases worldwide, with more than 1.320 million deaths . Faced with the second wave, Europe has been confined. The United States is the most affected country with more than 246,000 deaths and more than 11 million cases, and is also taking restrictive measures such as in New Jersey and Michigan.
The end of the year marks the arrival of production from Central American countries, or Colombia, which adds downward pressure to the market.
Arabica coffee production in Colombia amounted to 1.159 million 60-kg bags, down 15% in October, compared to 2019.
In Brazil, forecasts for the next harvest are down due to the effects of drought this summer, particularly in Minas Gerais.
According to the International Coffee Organization, world coffee exports in 2019/20 fell by 4.9% to 126.9 million bags. Production in 2019/20 is estimated at 168.84 million bags, down 2.5%, and consumption is estimated to fall by 0.9% to 167.59 million bags. This would lead to a surplus of 1.24 million bags.
The price of Arabica coffee is also benefiting from concerns about the supply of Robusta coffee . Indeed, Vietnam, the largest producer of this type of coffee , is experiencing very heavy rainfall following the passage of several typhoons, which makes harvesting difficult and threatens to damage the crop.

WEATHER IN BRAZIL

90% of Brazilian coffee is grown in 4 regions: Minas Gerais, Espirito Santo, Sao Paulo and Parana.
Rainfall was below normal in October in the Brazilian coffee belt. The rains were late in coming and irreversible damage is feared for the next harvest. The rainy season has now begun. Last week the rains were below normal. It fell by 25 to 50 mm. According to the forecast, next week the rains will be in line with normal with a probability of more than 50 mm.

ICE US CERTIFIED COFFEE STOCKS

Coffee stocks are up to 1.198 million 60 kg bags, compared to 1.170 the previous week. ICE US stocks of Arabica coffee are below the five-year average. The low stocks may provide some support to the coffee price on futures contracts.

THE DOLLAR

The DXY index representing the Dollar against a basket of foreign currencies closed last week up to 92.755, after a sharp decline in early November. The U.S. elections will continue to bring volatility to the currency market. Joe Biden will be sworn in on January 20, the Senate remains Republican for now, but a second round will be held on January 5 in Georgia. There is still a lot of uncertainty about the size and date of the famous plan to support the American economy. The Fed has announced that it will increase its "firepower" if necessary. Forex traders therefore anticipate an increase in the money supply.
The pandemic is not weakening, Europe has reconfirmed itself in the face of the second wave, the United States is also taking new measures of restrictions in some states. The hope of a vaccine, with the announcement of Pfizer , calms the markets and prevents for the moment the dollar from playing its role as a safe haven. Caution is still called for, however, as many questions about vaccines remain unanswered. The dollar has a strong influence on the price of raw materials, and it will be very difficult to predict its evolution in the coming months.

Yesterday, the Brazilian Real closed lower at 0.1828. The Dollar's fall allowed the Brazilian Real to rebound. The BRL /USD pair is positively correlated with coffee futures prices. A weak Real increases the competitiveness of Brazilian producers, and encourages them to export.

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