Coffee Commentary by BGC
Good morning all. After Mondays spanking, Tuesday observed steadier global equity markets finding support after a more composed Chinese Market underpinned sentiment (Bloomberg ran a good note on this: http://www.bloomberg.com/news/articles/2016-01-05/china-said-to-intervene-in-stock-market-after-590-billion-rout). Commodity focus was diverged with crude dunking its head under water once again leading the way for a broader commodities sell off, compared to its peers coffee faired moderately well. Arbitrage players visible clashed throughout the afternoon in a day that saw 3 cents of travel on the most arb pairs, ultimately arb buyers had to compete with Vietnamese induced selling on the Robusta Mar16
contract – hinting that both non-commercial and commercial gross shorts extend into the doom and gloom price action. Commercial interest was noted as the march contract knocked on the 1500 handle. Commercials reported Vietnams trading at +10-20 for nearby shipment in moderate volumes as business ahead of Vietnamese New Year celebrations is concluded. Tet will take place from the 8 th to the 13 th of February, which effectively sees business and operations winding into the week ending the 5 th .
Conab are expected to release their first 2016-17 crop forecast on the 20 th of January. Weather reports generally look for an improvement in levels of rain in Brazil’s main coffee producing regions over rest of this week. World weather inc note scattered showers and thunderstorms impacting Bahia and a few immediate neighbouring areas through Friday of this week while coffee production areas to the south experience a net drying bias. MDA Weather services follow a similar note citing “Showers this wk in Sao Paulo, Parana will maintain plenty of moisture for cherry growth while rain in Bahia will reduce dryness concerns”. Further relief is anticipated into this weekend and early next week; these reports against the backdrop of weaker switches and Vietnamese selling have done little in the way of helping the market shrug off the broader commodities weakness.
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