Mileura Capital: Thoughts on Coffee & Cotton 3rd February 2020

February 10, 2020

A bruising week for commodity markets in general and cotton and coffee were amongst the hardest hit.


After posting 140c/lb in December we are now back below 100c and there does not look to an end to the carnage in the short term. I was friendly in Q3 last year, missed the sell off in January and started getting friendly again at 106-108. How wrong I was on that call.

Aside from the macro issues that are impacting sentiment in general and the BRL. Coffee is suffering from a large amount of stale longs, shorts with a lot more firepower thanks to the yield curve move and a pile of coffee certs that now do not look so cheap even at 100c.

H2 2020 could still be interesting but I think without some stabilisation in price action, it is a market better to leave alone for awhile. Daily and weekly charts look horrible.


The cotton market has been one of the markets benefiting from the trade-deal rhetoric and lower supplies in the USA vs expectations 3-6 months ago.

However, at 70+ cents cotton to me is expensive. Demand is not that great, thanks to the rally from October you now have a crop that is attractive to plant vs competing crops and the competition from India, WAF, CIS etc coming on line.

I don't think we revisit October's lows in the short term unless a) the trade deal phase 1 is pulled (some chatter on that today) and/or demand does take a significant hit from the Corona virus.

Longer term charts do not look friendly if you ask me. A long bear flag appears to have been put in place.

Download PDF