9 July 2020
- This week we are registering looser supply conditions along the global bean supply chain. If this accumulation of supply intensifies in the next 3-5 days, the recent market strength may not hold ground for long. Weather conditions have emerged as the main swing factor for prices. Our proprietary climate model turned decisively bullish 2 weeks ago suggesting that stress is piling up for early-mid July. Please refer to Figure 1 for our proprietary Climatic Conditions Index.
- As implied in our previous publication, our spot up and mid-stream demand assessment turned bullish for July. The uptick in demand is partially driven by firmer downstream demand which is demonstrated in Figure 2. The recent negative trend during weeks #1-18 is clearly visible. The recovery in prices was supported by the pent-up demand which surged during weeks #19-25.
- The macroeconomic environment continues to improve. Evidence suggests that credit continues to expand in the core consumption regions, but the demand for credit lines from economic entities is getting weaker again. Many market participants watch the behavior of the speculative long/short positions closely. We fail to find any compelling evidence that such positioning creates any meaningful trends. Regardless, we still utilize this information as a trend-confirmation signal.