The “futures only” OI was down 2 lots for the period covered in the COT and up a mere 3,267 lots in the supplemental. The position changes that we see are not very dramatic but an important element lies in the lack of activity itself, namely with the managed money.
We were not sure during this period if the funds were selling or not but we see now that they weren’t. They were actually buyers. The couple of days when the market was weak was large traders liquidating. The impact of coronavirus is difficult to understand when it comes to coffee. It may be necessary for funds and other traders to free up margin needed for other markets and with respect to funds it would likely mean short covering. We did see the OI drop for the remainder of the week indicating liquidation on both sides.
There are other forces that can swing the market. The Real continues to drop. USDBRL was up to 4.5126 on Friday before it dropped and ending at 4.4733. There was some far forward selling late in the day. Production estimate have been bearish. Weather has brought a lot of rain in the coffee regions especially in Minas Gerais causing some crop concern. Every production estimate that’s released carries the stipulation of how bad the production year has been because of weather. Warehouse stocks are dropping again which may be a sign for higher prices. The bottom line is that whatever selling has entered the market has caused very temporary dips and has given us buying opportunities. The fact that funds have been buying rather than selling is significant. It may be a temporary action until the CVirus panic is over but for now the market is looking fairly good. Spreads in KC continue to be strong for unknown reasons. If anyone has a clue, please share.
In RC the market is quiet and funds are still selling short