Blue Line = BRLUSD

The COT report shows a market in holiday mode in Arabica. Most sectors liquidated longs and shorts providing weakness and strength in a narrow 4.55c range and a net change of negative .60c. In Robusta however, fund selling was new and abundant but some liquidation was present among the sectors. Commercials were buyers in both markets.

Trading consisted of holiday liquidation and hedging/unhedging related to Friday’s option expiration. March settled at 121.60 on Friday and there were no unusual exercises or abandonments. The Real continued to be strong, closing at 5.0656 in USDBRL, but not having much evident impact on prices.

On Friday, the market was steady. It reached a high of 123.55 at the early opening, close enough to the notorious 124.00 level to attract selling. 120.00 proved to be a good support area as well. We’ll see on Monday if it holds without options in the way.

The fundamental situation seems to be mixed. ECOM who is usually higher than any other entity that provides estimates (70mm bags for ‘20’21) is projecting 55.25mm bags for ‘21’22, below consensus. As Short Dude has commented however, the projected production of ‘21’22 is almost the same as ‘19’20. Actually, at 56.33 it is higher by over a million bags. As Gomes posted with the USDA report, Brazil’s carryover stocks are over 5mm bags, (ICE Brazil stocks continue to climb), while global carryover stocks are above 41mm. To me, this dampens any bullish sentiment based on production. At the same time, we can dismiss any reports of reduced consumption as a result of the pandemic.

Illy announced expansion of retail marketing in the US and Starbucks is calling for an increase in profits. It seems that all markets, including equities, are betting on a brighter outcome, especially with a vaccine now being administered.

For now the market is slightly steady but subject to holiday liquidation. Index funds may provide strength as they begin rebalancing in the near future. Some commercials are still active while others have mostly suspended their operations.