On face value, the situation that the COT presents is bullish. However, in my view, the commercial activity, except for the forward buying and selling, is mostly option related. If the market were to reverse higher, we would see new selling and long liquidation by both commercials and others in both RC and KC.
The continued increased selling by a few funds may provide for a more elastic recovery it it were to happen but under current conditions nothing much would change. The delta game will continue by all sectors, including index, as long as current global conditions prevail and as long as fundamentals are as they are.
Trade confrontations between the biggest consumer country and the biggest producer country are affecting the economies of the entire world. Investment in most commodities has not been rewarding, except for non-industrial precious metals. As to coffee fundamentals, we see good demand but there is this looming threat of greatly increased production by the Bolsonaro administration. Even if the deforested lands are used for commodities other than coffee, the aim of the administration is too increase production in all Brazilian commodities. Until the coffee market is driven by consumption rather than production once again, and until the world normalizes once again, we will continue to see a depressed coffee market.
This is the way I see the situation. It doesn’t mean that I am correct. If anyone has a different perception please share it. We can only learn and profit by discussion.