Of course it is not the real situation.
But in the theorical example above:
With same production/surplus,
In one case everyone wants to stop the market, structure inverts like crazy, Brazil diffs go extremely low, Futures rally to the roof.
In the other case, all Brazil surplus tends to go to the terminal market, futures sink, extreme contango, and Colombian diffs explode.
In both cases, Brazilian physical coffee trades low (surplus) and Colombian physicals very high (deficit), but the reaction of the futures market is exactly the opposite.
« Back to index