We will now begin 2022 with the market pressing downwards. Let's see if this pressure has been end of year related or not. Ignoring any end of year scenario, the market seems to have reached a level of consolidation and, as it typically does after such a pattern, it should resume its upward momentum. Volume has been in the teens, including spread,indicating that the market has been the subject of traders' holiday abstention as well as liquidation. But the OI has been close to unchanged every day indicating both liquidation and new business. It is safe to assume that the momentum funds have been selling. The buying could very well be, at least in part, the consumer sector. In observing the depth of market, there is evident support in N22 and forward starting at around 222.50 equivalent in H22. Of course, this support could be option delta buying or other type of business. I choose to suspect roaster or merchant buying. After all, regardless of fundamentals, currency, weather, and of price the consumer sector needs to replenish its supply. So the market is certainly capable of further pressure but any further drop will be an opportunity
Spreads continue to be supported and are behaving much like the outright market where there is no follow through on weakness. RC spreads of course continue to show strength as shipping in Viet Nam remains limited. In KC it seems that shipping is more fluid and spreads may be responding more to actual shortages anticipation rather than to shipping issues. We may need to accept that coffee over 200.00 and spreads at a premium are the new normal.
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