I do believe that we can count on a 5% reduction from the biennial reduced crop which puts us at 39 mln Arabica production with definitely the possibility to add to these losses as the season progresses. I think 39 mln bags is baked in. From a trading point of view there is no point trading on very agressive numbers until the market begins to respond better. There is no question we have a wonderful setup but we would need the heavy rains forecast to not verify. On the other hand we do have a very constructive situation which I believe will keep us from revisiting the lows. If we look to the forecast size of the crop 39 mln Arabica plus 19 mln Robusta or 58 mln bags with exports at 41 and domestic at 23 we will draw down Brazil stocks 6 mln bags. Letís be clear demand is being held back by Covid so the forecast is for no demand growth for now compared with a usual annual 2% . We are already saying 2 years with no demand growth, 3 I donít think so. Could easily see a big increase in pent up demand against this crop with inventories being re built and demand coming back. Letís also not forget the reductions in Arabica production in the poorer Central America countries which we are already seeing. Demand for Brazil origin the cheapest in the world is likely to grow. Could the real also revalue? The rally we had was not on weather issues which most traders were unaware of but on a general reflation theme with coffee being storable and very cheap. Most of this liquidation should be complete. If a strong impulsive wave develops I will be sure to follow. Staying conservative for now.
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