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TECHNICAL ANALYSIS OF ARABICA COFFEE
Last week, ICE US coffee futures closed higher at 125.25 ct/lb. Arabica coffee prices, although they could not reach them, approached the highs of August.
The USDA reduced world coffee production by 0.34% to 175.50 million bags. They forecast world coffee demand for the same period at 165.40 million bags. Their latest forecast would indicate the potential for a world coffee surplus of 10.1 million bags.
CONAB, announced that Brazilian coffee producers, due to positive biennial factors for Arabica coffee plantations, are expected to produce 63.08 million bags for the season from July 2020 to June 2021. This estimate has been revised upwards by 2.36% compared to their previous estimate of 61.62 million bags. CONAB has revised its projections for Arabica coffee production upwards by 3.17% compared to its last estimate, which is now expected to total 48.80 million bags, while Robusta production has also been revised upwards by 0.70% compared to their last estimate to 14.30 million bags. The area under coffee cultivation in Brazil increased by 3.9% in 2020 compared to the previous year, to 1.88 million hectares.
On the international level, the Republican leader of the Senate Mitch McConnell announced Sunday evening that a 900 billion agreement would be reached. The Fed said its stock purchases would continue at the current rate of $120 billion per month until substantial additional progress has been made. The brexit saga continues, with the European Parliament's Sunday night deadline for a deal passed, but negotiations will continue. No one seems to want to take responsibility for a possible failure. After Pfizer, the FDA also approved Moderna's vaccine. As far as the pandemic is concerned, the vaccination campaign has started in the United States. The new strain of coronavirus detected in Great Britain worries, it would be 70% more contagious. The global death toll is rising, we have just passed 76 million cases worldwide, with more than 1.692 million deaths. The United States is still the most affected country, with 317,000 deaths and more than 17 million cases.
The Dollar fell last week, with the DXY closing lower at 89.924, hitting a 2 1/2 year low. The long-term trend is still bearish.
WEATHER IN BRAZIL
90% of Brazilian coffee is grown in 4 regions: Minas Gerais, Espirito Santo, Sao Paulo and Parana.
The rainy season has started and lasts until April-May. Rainfall was below normal in October and November in the Brazilian coffee belt. The rains were late in coming and irreversible damage is feared for the next harvest. Last week, rains were below normal, especially in northern Minas Gerais. However, the wet weather in December is perceived as more favorable for the next harvest. Heavy rains are expected next week.
ICE US CERTIFIED COFFEE STOCKS
Coffee stocks are up to 1.370 million 60 Kg bags, compared to 1.324 last 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 down to 89.924, hitting a 2 1/2 year low. The long-term trend is still bearish. The possibilities of reaching an agreement on a contingency plan to support the U.S. economy, as well as the possibility of an economic recovery, are expected to continue.
Disappointing economic results weighed on the currency last week. Indeed, U.S. Retail Sales down to -0.9% and Unemployment Claims up to 885K disappointed.
The Brazilian Real closed stable at 0.1962 last week. The Brazilian Real has been benefiting in recent weeks from the falling Dollar, breaking the bearish channel it was in, and benefiting greatly from the rise in coffee prices this past week. If the dollar's downtrend remains unchanged, the Real will surely test the 0.20 it hasn't reached since June. The BRL/USD pair is positively correlated with coffee futures prices. A low Real increases the competitiveness of Brazilian producers and encourages them to export.
COMMITMENTS OF TRADERS
The weekly COT (Commitments of Traders) report of the Commodity Futures Trading Commission (CFTC) shows all the positions opened by all market participants. The COT report is published on Friday, and reflects the open positions on Tuesday of the same week. It shows the position of commercial traders (producers, commodity buyers, ...) but also non-commercial (speculators).
The net positions of speculators on the futures markets are particularly interesting to observe.
The speculative net position on the cotton futures markets is up this week to 36.105 K instead of 31.519 K.
TECHNICAL ANALYSIS OF ARABICA COFFEE
Last week, ICE US coffee futures closed higher at 125.25 ct/lb. Arabica coffee prices, although they could not reach them, approached the highs of August.
The USDA reduced world coffee production by 0.34% to 175.50 million bags. They forecast world coffee demand for the same period at 165.40 million bags. Their latest forecast would indicate the potential for a world coffee surplus of 10.1 million bags.
CONAB, announced that Brazilian coffee producers, due to positive biennial factors for Arabica coffee plantations, are expected to produce 63.08 million bags for the season from July 2020 to June 2021. This estimate has been revised upwards by 2.36% compared to their previous estimate of 61.62 million bags. CONAB has revised its projections for Arabica coffee production upwards by 3.17% compared to its last estimate, which is now expected to total 48.80 million bags, while Robusta production has also been revised upwards by 0.70% compared to their last estimate to 14.30 million bags. The area under coffee cultivation in Brazil increased by 3.9% in 2020 compared to the previous year, to 1.88 million hectares.
On the international level, the Republican leader of the Senate Mitch McConnell announced Sunday evening that a 900 billion agreement would be reached. The Fed said its stock purchases would continue at the current rate of $120 billion per month until substantial additional progress has been made. The brexit saga continues, with the European Parliament's Sunday night deadline for a deal passed, but negotiations will continue. No one seems to want to take responsibility for a possible failure. After Pfizer, the FDA also approved Moderna's vaccine. As far as the pandemic is concerned, the vaccination campaign has started in the United States. The new strain of coronavirus detected in Great Britain worries, it would be 70% more contagious. The global death toll is rising, we have just passed 76 million cases worldwide, with more than 1.692 million deaths. The United States is still the most affected country, with 317,000 deaths and more than 17 million cases.
The Dollar fell last week, with the DXY closing lower at 89.924, hitting a 2 1/2 year low. The long-term trend is still bearish.
WEATHER IN BRAZIL
90% of Brazilian coffee is grown in 4 regions: Minas Gerais, Espirito Santo, Sao Paulo and Parana.
The rainy season has started and lasts until April-May. Rainfall was below normal in October and November in the Brazilian coffee belt. The rains were late in coming and irreversible damage is feared for the next harvest. Last week, rains were below normal, especially in northern Minas Gerais. However, the wet weather in December is perceived as more favorable for the next harvest. Heavy rains are expected next week.
ICE US CERTIFIED COFFEE STOCKS
Coffee stocks are up to 1.370 million 60 Kg bags, compared to 1.324 last 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 down to 89.924, hitting a 2 1/2 year low. The long-term trend is still bearish. The possibilities of reaching an agreement on a contingency plan to support the U.S. economy, as well as the possibility of an economic recovery, are expected to continue.
Disappointing economic results weighed on the currency last week. Indeed, U.S. Retail Sales down to -0.9% and Unemployment Claims up to 885K disappointed.
The Brazilian Real closed stable at 0.1962 last week. The Brazilian Real has been benefiting in recent weeks from the falling Dollar, breaking the bearish channel it was in, and benefiting greatly from the rise in coffee prices this past week. If the dollar's downtrend remains unchanged, the Real will surely test the 0.20 it hasn't reached since June. The BRL/USD pair is positively correlated with coffee futures prices. A low Real increases the competitiveness of Brazilian producers and encourages them to export.
COMMITMENTS OF TRADERS
The weekly COT (Commitments of Traders) report of the Commodity Futures Trading Commission (CFTC) shows all the positions opened by all market participants. The COT report is published on Friday, and reflects the open positions on Tuesday of the same week. It shows the position of commercial traders (producers, commodity buyers, ...) but also non-commercial (speculators).
The net positions of speculators on the futures markets are particularly interesting to observe.
The speculative net position on the cotton futures markets is up this week to 36.105 K instead of 31.519 K.