This week in global economics, the US dollar finally devalued slightly after rampaging higher in post-election trading as news of reduced unemployment figures and improved economic performance in the US generated renewed confidence in an interest rate hike from the Federal Reserve. Italian voters will go to the polls on Sunday to vote on constitutional reforms, a referendum which could result in Prime Minister Matteo Renzi resigning his post and sparking a crisis in Italian banking as well as the European economy. In Brazil, a weakening Real motivated origin selling as the central bank lowered interest rates while favorable rains in the coffee belt encouraged flowering. Since November 8th, C market pricing has dropped from a high of $1.7955/lb to $1.4490 today, happy Friday.
After bravely attempting to break $1.80 in the beginning of November, the C market has taken a beaten as a combination of macroeconomic factors swept the legs from right under the prolonged recovery in prices. In the last month since the election, the US dollar firmed up considerably, speculative investors moved out of commodities to participate in the stock market rally and the Real devalued from a spiraling Brazilian crisis. After seven months of jerky recovery, the C market posted four weeks of depreciation, knocking futures out of its prolonged range and back to the mid $1.40s. A technical reading indicates support for the C market at $1.5385, $1.4580 and $1.3775, though only the macro influence of today’s USD devaluation has been able to lend any credibility to these levels. The weekly chart below helps to visualize the speed of this latest downturn.
In the eye of my green buying mind, this is an opportunity. Though coffee pricing isn’t at the lowest level this year, it’s $0.30/lb cheaper at time when Colombia is delivering excellent quality and in abundance, and when Central American offers are being made in earnest. Contact your trader to discuss the best options for your needs and save the extra pennies for the next rally.