NEGATIVES
• Political Instability
• Social Distancing
• Lockdowns
• C-19 Impact On Consumption
• Weak Real
• Record Production From Brazil’s 20/21 Crop Continues Flowing To Market
• Continued Increase In Certified Stocks
• Year End Vietnam Farmer Selling Will Continue For A Few More Weeks
• Intermediary Inventory OK For Now
• Increased Rain In Brazil’s Key Coffee Producing Areas
• USDA’s Latest 20/21 World Forecast Projects Production Consumption/Surplus
of 10 Million Bags
• USDA Also Forecasts A 5 Million Bag Increase In Stocks, Primarily Brazil


POSITIVES
• Excluding Brazil, the many origin by origin differentials remain generally firm
• For different reasons, the lower 21/22 crops in Nam, Brazil, Central America &
Colombia should provide underlying support
• Brazil’s lower biennial crop further reduced by drought, but the rains have
returned
• Some damage already done, but the normalization of the Jan-Fed rain will help
Brazil’s crop
• C-19 Impact on Production
• Brazil’s upcoming Arabica crop estimates indicate a 25-40% decline.
• Brazil crop size & quality won’t be known until after the Jan-Feb period
• Non-retail type coffee consumption has picked up some of the lost retail
consumption
• Return of the retail coffee trade particularly important, but unknown
• After reaching new lows and the worst year in decades on meaningful volume,
the Brazilian Real may be bottoming

FUTURES

• Futures recently corrected about eleven cents from the $1.04 rally to the
$1.30 high
• With homerun value at the $1.10-1.15 level, the March ($1.22 ) and
May ($1.25) futures have some risk
• $1.17 represents a 50% retracement, about two cents below the recent low
• 90 minute technical picture is sloppy
• Daily technical picture positioned for rally
• While the weekly futures chart indicates a bullish cycle change, the
short term weekly formation is negative and needs more corrective work.
• The weekly ascending triangle/flag formation is not only bullish, but
indicative of a looming upside breakout
• Brazil’s 21/22 production shortfall won’t be felt until stocks decline, but
futures could react in advance, particularly if the Real appreciates
• While Brazil’s reduced crop outlook should provide underlying support,
macros could produce C market headwinds
• Objectives are $1.45, $1.70 & $2.10


LONG-TERM WEATHER PATTERNS

• Climate change remains controversial, but unfavorable long-term patterns in
Nam, Brazil, Honduras & Colombia may be manifesting.
• Trading the weather has always been problematic, but given today’s low coffee
prices, this dynamic could produce violent price swings way beyond the
21/22 crop year.


End..........