The rally in coffee the last few weeks has been inspired by massive short covering in the face of recent dry Brazil weather and the fact that Brazil producers/hedgers ran out of much of their coffee. Over the last year, a weaker Brazil Real inspired producers to take advantage of what were higher coffee prices in Brazil Real terms, ( priced in dollar, coffee prices fell to 90 cents just a month ago.) In other words, major hedge fund selling and exports helped to pressure the market until recently.
Rains are starting to hit Brazil coffee areas otherwise a massive rally would ensure in coming weeks or months.
There have been some bullish developments from a weather stand-point–A) Several tropical systems that impacted the beginning of the Vietnam harvest; B) Climate change and a positive Indian Dipole that may pose a threat to the 2020 Indonesia coffee crop. Already, farmers in Indonesia have reported a greater number of fires and some problems could develop if rains do not pick up by the next rainy season this spring; C) A dry-hot October in N. Brazil, which may have nipped some of the developing coffee bloom. (However, critical rains will fall in November)
A tropical system last weekend in Vietnam has delayed the coffee harvest. Traders will be watching weather it drys out or not. This will be an important factor, as well as Indonesia’s 2020 crop to the Robusta coffee market. Robusta coffee is lower quality coffee (instant coffee), which is grown in Indonesia, Philippines and NE, Brazil.
In the meantime, Climatech (above), my in house long range weather forecast program, has some interesting and important predictions about the long range for global coffee areas. If you are interested in finding out my feeling of what coffee prices may do in the months ahead and how teleconnections, such as El Nino, La Nina, arctic sea ice and the Indian Dipole will play an important critical role in global coffee weather and other commodities. Please sign up here for occasional free reports.
