Weekly Coffee market review 10/19/2020 COFFEE C FUTURES (CONTINUOUS: CURRENT CONTRACT IN FRONT) ICEUS:KC1! Commodity-market-review Help us, by consulting our free daily magazines with color stock charts and weather maps, on our website https://www.commodity-market-review.com Blow up the view counters π!! Thanks π TECHNICAL ANALYSIS OF ARABICA COFFEE Last week, ICE US coffee futures closed lower at 107.25 ct / lb . Arabica coffee after a fall of more than 20%, is trading in a range of 106/112 cents. Brazil is the world's largest coffee producer and alone accounts for about 50% of the world's Arabica production. The harvest is finished there, and it is very good, and could be the second largest ever recorded with more than 61 million bags. The very low Real is benefiting Brazilian coffee exporters who are taking advantage of their increased competitiveness to flood the market. According to Reuters, 64% of Brazilian production has already been sold compared to the five-year average of 53%. The depreciation of the local currency increases producers' income from dollar-denominated products. However, lower coffee prices have slowed sales in recent days. As far as demand is concerned, we are facing a worsening health situation, particularly in Europe. Great Britain, Belgium, Germany, the Netherlands, Spain, Poland and the Czech Republic have announced new restrictions, often with the closure of bars and restaurants. Bars and restaurants that are places of high coffee consumption. Paris has announced a curfew from 9pm to 6am in 9 major cities. An interesting study conducted in Canada by the company Allegra, shows a 22% drop in coffee consumption in the country since the beginning of the pandemic. The International Coffee Organization ( ICO ) forecasts a surplus of 1.54 million bags for the 2019/20 season. In the United States, the situation regarding the US support plan is increasingly uncertain, and there is little prospect of a full pre-election agreement. The Republicans want to bring a limited $300 billion aid package to the Senate vote on Wednesday, and Nancy Pelosi has set Tuesday as the deadline for a deal. The various twists and turns and sometimes contradictory rhetoric in the run-up to the American election suggest a likely increase in volatility on all markets. COFFEE WEATHER IN BRAZIL The harvest is finished in Brazil. In the southern hemisphere, the coffee tree starts flowering between August and October. A dry period and a hydrous deficit is necessary to start the flowering. Only in this delicate and important stage for the next harvest, the drought should not exceed 60 days. The rainy season in Brazil from October to March has been long in coming. 90% of Brazilian coffee is grown in 4 regions: Minas Gerais, Espirito Santo, Sao Paulo and Parana. It rained in most of these 4 regions last week with an average of 25mm of rainfall. Seasonal forecasts in the coffee belt now predict above normal rainfall in November. The question will be whether there will be irreversible damage to the next harvest as a result of the drought of the past months. ICE US CERTIFIED COFFEE STOCKS Coffee stocks rose to 1,120 million 60 kg bags, up from 1,098 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 93.72, and has been trading in a 93/94 range for the past 2 weeks. The situation is very confusing regarding the U.S. stimulus package. Donald Trump has made many contradictory statements in recent weeks. On Wednesday, the Republicans will propose to the Senate vote a limited support plan of $300 billion. Nancy Pelosi, the Democratic Speaker of the House of Representatives has set an ultimatum for Tuesday for a pre-election stimulus. On the FED side, things will certainly remain frozen until the outcome of the American election. The FED has insisted on the need for a quick vote on a support plan, and assures that the key rates will remain permanently low. A low dollar is generally favorable for dollar-denominated commodity markets. The Brazilian Real closed lower last week at 0.1767. The trend is still bearish , the fear of a 2nd epidemic wave and the gross public debt having reached 87% of GDP weigh on the Real. The BRL /USD pair is positively correlated with coffee futures prices. The very low Real benefits Brazilian coffee exporters who take advantage of their increased competitiveness to flood the market. A low Real increases the competitiveness of Brazilian producers and provides an incentive for 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 coffee futures market is down this week to 46.226K instead of 47.505K.