I agree with you. Commercials should defend this market and most all of this drop should be fund driven, as further weakness if we will see, will become from them.
The market is completed dislocated. Origins has plenty of time to fix against December, the Brazilian real should gain traction next time in the next few days and the explanation of the drop, because its is raining now, doesn't have any sense. It is completely normal rains in Brazil now. It is the rainy season. It is too premature to say will be a drought or the current rains have solved a problem of a potential drought in the future. Moreover it is in the mind of Meteorologists that LA NINA event could occurs, with a chance around 75% and that could bring landslides and flooding for countries like Colombia and Peru and central america and drought for Brazil.
This drop is too exaggerated. The story about trucks full of coffee loaded and charging more freight and no space to storage beans could be true but this is the time when Brazil do the shipments and the Industry will be hungry to buy. We are entering now to the Buying season.
I see also in general stocks are depleting, many Importers with the start falling diffs and prices are going to buy huge quantities of coffee beans. They have to average down and correct all the gambling they did last year when they sold short future the diffs.
Also I see Automatized SYSTEM TRADING models have exaggerated this drop and there is not the time for origin to capitulate. I see also world is opening more and MACROS favour to be long in commodities. Maybe commodities with expectations of a higher inflation is the only thing you can trust. Also the potential superávit of the World coffee balance it is too fragile and could become a deficit if a drought event could happen or with the coffee yields that are very low this time.
I am expecting a good bounce back of the market although some weakness I cannot discard. ST could be still selling
Thank you for the COT analysis. It is really good Tango!