A couple of quick points. In regards to "frost", every time it is mentioned it seems to touch a nerve with at least some participants. In this case, while it is very early in the season, the forecast does in fact have cooling temps. The very idea of cool weather, does not suddenly mean the coffee regions of Brazil will experience cold, the likes of which were never seen before. Rather, I think this time of the year brings us all a reminder to be alert in the coming weeks/months as the winter in the southern hemisphere draws near.
Tango hit the nail on the head. With the current state of the market; COT positioning, high OI etc, the market is potentially quite vulnerable. While yesterdays gains of 3.30% were impressive, those around long enough know that any legitimate "cold" forecast would have created a vacuum type move to the upside. The types of move that are labeled, "rip your face off"...
Intrade, I think was kicking off the frost season with some friendly reminders of what has occurred in years past. I think coffeespec and others were justifiably upset because of the manner in which it was posted. To be honest, I was expecting to see the post showing the jet stream image from the 1994 event. I believe Intrade posts that at least once of twice a year during the June- August months. A post that often reminds me to be on my toes. Still, I do not meant think the post was meant to deceive, as it became clear the link was opened that the post was more of a history lesson than anything else.
In my opinion, today's market is not even remotely relatable to that of 1979, 1994, or any other year for that matter. In fact, the market to me looks much different than it did during the last meaningful rally in 2014. Record breaking open interest, record amount of contracts held long and/or short (within various groups), almost complete control by algorithms/ AI systems*, expansive options OI and a plethora of option strategies are all significant characteristics of the coffee market in 2019. That is all without the fundamental narrative: the shift to safer areas of production, record levels of production, etc.
To say this market needs a lifeline is an understatement. BEARS have enjoyed quite the down turn, and whatever BULLS remain have not had much to smile about. Taking that a step further, the current price vs. the cost of production is burdensome to many farmers. While it is always a long shot, the thought of a frost event potentially giving upside life to this market is welcome from my point of view.
* There is much to discuss in this regard- macro, fx, etc. It requires much deeper thought and lots of time to analyze and discuss.
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