Arabicaís report will not be released until Monday due to the Thanksgiving holiday. In this market, we had ended at 224.50 the report prior, and on the day of the new report, it rallied to a high of 235.80. Volatility increased and the market bounced between almost 240.00 to well below 230.00. On the last day, 240.00 was penetrated, reaching a high of 244.75 and closing at 242.05. Prices ranged 18.20c with a net change of 17.55c and an average range of 10.64c. Volume was light as the average volume per each cent was 1,975 lots in a market that we were used to seeing over 4,000 lots for each cent on average, indicating a market with little support/resistance.
It is likely that the KC COT report will show some similarities to RC insofar as commercial selling and spec buying. However, there is a very strong demand for the front three spreads. The HU which comprises the HK, KN and NU of course, began at -.75 and ended at +2.45. The backwardation, or premium market, is due to mostly the need to buy rather than the will to do so. We have discussed shortages due to supply disruptions due, to cargo ship congestion and a shortage of labor. We see warehouse stocks depleting, (certified stocks are down 174,324 bags just this week). The final reason for the strength in spreads, and possibly the market in general, is that it is obvious that some commercial traders got caught short Dec. The high open interest that was left after option expiration was reduced by 11.5k EFPs and 2.5k EFSs together by the purchasing of spreads. No one wants to get caught again. Also, we are well into notice period and nothing has been issued yet. Yet, letís keep in mind that the majority of the elevated OI in H consists of spec longs.
Several merchants and roasters in the forum have expressed their frustration with rising prices. Personally, I feel sympathetic, as I did with the producers when prices were depressed. Some traders are calling for a correction which of course is a possibility. The market however is not acting like itís ready yet. The damage as a result of whatever drought and frost that Brazil experienced is one thing. But the supply disruption caused by covid is another. And now we have the latest strain - Omicron.
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