Some Coffee Commentary for Friday Nov 23rd

 




 Tropical Report™ By: Eric Nadelberg, Consulting
Analyst 



This Day in History: GM Produces 50 Millionth Car - 1954 

The coffee market was a bit heavy today, it must have been all that turkey
yesterday, as it made the day’s high just ten minutes into the early morning
session, and had its best rally of the day after making the session’s low at
11:30 AM on a 1:00 PM market closure. 
 
The opening was at 153.00 (-45) and prices rallied to the day’s 153.85 (+40)
high by 3:40 AM. From there it was a steady march lower, broken only by the
occasional light and short-lived cover rally. But trend was intact and actively

influencing the activity. It appears that the belief of a 130.00 or lower
market is becoming conventional wisdom, as more than a few traders noted
that 130.00 price as a level the see prices sinking to. That does make me a
little nervous, although I hold the same views. I just don’t like so much
company inside the boat so to speak. A late year rally seems possible, the
market is very short and there are those well-advertised 10,000 lots of fund
rebalancing to be done. But looking out into the distance, there’s coffee,
coffee, and more coffee available. Until there are changes in roaster buying
patterns, enough of that coffee will end up as inventory and not roast and
ground, that the dynamic is going to need some real wrenching changes before
the trend of increased robusta usage is arrested. 


  When the lows were in the market was able to rally back to trade 151.00
(-245) by 12:40 PM, but the market settled back to close at 150.80 (-265)
with the rump session finishing at 150.40 (-305) on the day.



Volume was a post-holiday no one really cared 8,466 lots, where 136 lots
traded in Dec and 7,051 lots traded in March. There were 950 spreads traded,
of which 133 lots were Dec/Mar that traded between -900 and -805
settling at  -865 (unch.)



 Jan options traded sporadically with no particular pattern. March was
pretty much the same, with some random trades in deep out of the money
calls. 

The market was quiet but the close was a new contract low close at 150.80,
and that tells you all you need to know. Coffee remains bearish with more
downside to go it seems as there aren’t many signs a bull can point to except
that the market is currently rangebound. But with no sustainable lift  showing, it seems a matter of time before this range is broken and the  market basis March starts closing in the 140’s as well. Of course the market is
closing and trading well; below key moving averages with a close back above  156.23 (as of tonight) needed before any thoughts of covering some of the  position enter into the equation.