It was just a brief help from the BRL

The last quarter of 2019 started very volatile for stock markets around the globe.

US manufacturing and service data came out below expectations sending the S&P500 down by 4% in two sessions to, then, recover half of the losses on Friday after the job market pointed to the lowest unemployment rate since December 1969.

There was also some negative speculation on the markets with Elizabeth Warren’s growing performance within the Democratic party, as she promises to go after the super-powerful tech companies.

In Europe, equities suffered a greater negative impact as the trade war threat spills into the continent after the United States gained the WTO case over subsidy programs to Airbus.

The dollar index (DXY) fell from its highest level since May 2017 in response to rising expectations of the Fed to cut interest rates at the end of October.

In New York the “C” had choppy sessions, rising rapidly along with the appreciation of the BRL, but then not being able to sustain the gains and ending the week down by US$ 1.90 cents per pound.

Fundamental Focus

Pictures of flowerings or buds just about to bloom provided relief among those who were concerned about the conditions of the trees in Brazil, as well as the forecast of rainfall and good humidity triggered more sales at the terminal.

The flow of coffee on the physical side slowed and the differentials in general had little changes, although there were some deals reported at levels incompatible with the replacement cost.

In the news, it was noteworthy Cooxupé’s announcement that it exported in a single day eighty thousand bags of coffee, or two hundred and fifteen containers, a record mark that shows the international community the muscles of the largest cooperative in the World, and one of the ways the coffee sector tries to fight low prices – increasing the use of technology and gaining productivity within the chain.

The International Coffee Organization, on its September report, said the World had a surplus of 4.05 million bags for the 2018/2019 cycle, up from a surplus of 1.43 million bags for the 2017/2018 crop. The entity estimates total production at 168.87 million bags, with 102.68 million arabica and 66.04 million robusta (there is a rounding difference in the report).

It is interesting to note the consumption growth, estimated at 2.1%, for a total of 164.82 million bags, with the rate of increase of 2.4% among importers and 1.3% among producing countries.

Assuming this percentage remains at the same pace in 19/20, along with a lower overall output mainly due to Brazil’s off-year production, the stats will show a significant deficit.

Several coffee professionals, producers, exporters, traders and roasters will meet this week in Basel, Switzerland, for another edition of the Swiss Coffee Association dinner.

Those who have been trying to get optimist about prices are hoping to hear encouraging news there, which eventually could change the negative tone that has prevailed in the marketplace for a few years. Pessimists will take the opportunity to at least socialize and exchange information, perhaps trying to anticipate when the tide will turn – even more so after all the beautiful pictures of flowerings that will be exchanged from now on.

Anyway, it is always a pleasure to see many of you and talk about this commodity that makes us addicted to follow it very closely.

Please, feel free to text me or call me if you have a spare time for an expresso or a beer/wine.

Technical Focus

December19 contract in NY settled virtually at the 98.90 support and a close below it shall make the market test the 97.25 level, with next support at 95.30 and then 93.40. The first resistance is at US$ 104.25 cents per pound. London has resistance at 1345, 1374 and 1435, while support levels are at 1317, 1287 and 1262 dollars per ton.

Wishing you a pleasant week,

Rodrigo Costa

Skype: rodrigoccosta10

WhatsApp: +1 646 468 7091