“Coffee’s forming a cup and handle”
• After a few impressive days of price recovery - which saw May arabica rally all the way above $1.13/lb - a sharply lower BRL this week put a stop to the ascent, taking it back below $1.05/lb on Thursday.
• Much of the moves over the week have been driven by the wider macro picture, which at the time of writing has reversed, as the dollar index is correcting from recent highs, providing new support for both arabica and robusta futures.
• On Wednesday the BRL fell to an all-time low within sight of 4.40 on the back of soft domestic inflation data and a wider EM currency selloff against a buoyant US dollar.
• Regardless of the weak futures market, the physical market sentiment appears bullish, with strong differentials and very limited selling.
• With high cash premiums, ICE arabica stocks could fall going forward as new gradings to the exchange becomes increasingly unattractive.
• Colombia has launched a 218 bn pesos ($63.9 mn) fund aimed at stabilising coffee prices and shielding farmers from volatile markets.
• Coffee prices in Vietnam rose slightly on the week as farmers held back from selling at low prices. The weather outlook remains dry in Lam dong and Daknong, with light rains in Dak lak and Gia lai.
• In Indonesia, exporters are quiet for April and May shipments; local roasters will start buying more in April. Weather in the arabica regions are good for maturation stage for the 2020-21 crop.
• ICE arabica certs are 2.16 mio bags, while Robusta certs are 15,251 lots
• We estimate funds in arabica are net short -9k lots and in robusta -38k lots