The market began with the high of 122.20, exact price of the previous COT period close, and dropped to a low of 110.90 to end at 114.35. Robusta had a sharp move lower on March 9 to a price of 1104 in May and a day’s range of $146. In looking at both COT reports, the immediate impression is “panic selling”. As highlighted in red, selling came from institutional/end users, large traders and managed money in KC and institutional/end users, large traders and small traders in RC. Twenty six traders in the KC managed money and large traders sectors got out entirely. What also stands out is that in RC over 5,000 lots were sold new by small traders. There is interesting activity on the buy side as well.
Commercials in RC loaded up. Funds, who have been steadfast shorts, began to cover. In KC fund shorts covered as well. We don’t know what these groups did for the remainder of the week but it is noteworthy that short funds were covering as the market dropped in both markets.
The discussion of whether the coronavirus is bearish for coffee began on the 8th of March when Gomes posted that the ICO predicted that coffee consumption will reduce drastically. Kannan correctly added that patronizing cafes will drop dramatically. However, in reading The NY Times last night, there was a report on how grocery shelves are being emptied of specific supplies, namely, disinfectants, batteries, cleaning goods, canned goods and toilet paper. I thought that toilet paper was a bit peculiar until I read that the coffee shelves are also empty. The point is that people will want coffee in spite of the cafes either being avoided or closed. But in looking at the coffee as part of the investment portfolio, some may consider it a disposable asset that may compensate for losses in other markets including equities. However, we have shorts and longs who just want out because of either uncertainty or margin reasons, as we see in the COT. In my view, the market remains unpredictable and volatile, with charts as reliable guides.
The Real is directly linked to the progress of the virus but the coffee market seems to be ignoring it for the most part. USDBRL closed at 4.8580 on Friday.
Spreads weakened slightly on Friday as forward bids were hit due to front selling.
Nagual, can you post a gold monthly? TIA