ICE Coffee Futures Soar to New Highs
Arabica coffee futures soared to new highs on a new reduced Brazil crop forecast. The active contract for July delivery settled 1420 points higher at 213.40 cents a pound. Volume reached 28,166 lots, including 4,731 switches. The new estimate for the 2014 crop came from VOLCAFE early on the session. They expect Brazil to produce 45.5 million 60 kilo bags, down 11 % from their December estimate. The Arabica crop is lowered to 28.4 million from 34.6 million and the Conillon is raised to 17.1 from 16.1 million. Industry buying and speculative short covering propelled the prices that reached the highest price since February 2012. Concerns about the real damage of the coffee crop in Brazil continued to encourage the bullish sentiment, and despite analysts have suggested that it is too early to have a clear scenario of damages and the size of the crop, a consensus amid traders, appears growing around the lows 40.0s. In other news, according with the Australian government forecaster, El Nino will probably start as soon as July. The study shows six of seven models suggesting the event will begin in July as temperatures have started to rise. Technically, the July chart shows the market breaking the recent resistance at 210.00. A confirmation of this action could drive prices to new highs. Open interest continued to decline evidencing the significant short covering. The OI has decreased 19,143 lots to 151,143 lots, since April 2, as prices gained 43.00 cents during the same period. London - More conversation surrounded the updated certified stock report which recorded a reduction of 447 lots taking the overall position down to 1,386 lots. This is the lowest working position since the change of contract size back in February 2009. The market continues to wait for the arrival of coffee shipped in March from Vietnam but for the moment there is no evidence of any build in stock. Robusta pushed higher into the morning in good volume, with much of the activity revolving around structure. May/July traded back out to $15 discount before narrowing to just $2 discount by late morning. July/Sept put together good turnover around level money. Further changes in Brazil crop numbers encouraged the strength in New York which dragged London higher. COT numbers this week were interesting with the board down $38 over the reporting period with the open position increasing by 6,356 lots. It appears a clear swap of exposure with the Processors increasing their gross short by 6.561 lots being offset with new longs in from the Managed Money sector which added 6,116 lots to the gross long book. This takes their net long exposure to 30,461. After Thursday’s rally the open position for Robusta was down 1618 lots driven by the sorting out of May exposure. Prices lost traction into the settlement with the board pulling in a combination of origin selling coming to the market and intraday liquidation to significantly reduce the day’s gains.
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Arabica Coffee Prices Rally on Renewed Production Concerns Dry Weather in Brazil Sparks Worries About Crop Damage By Alexandra Wexler
April 7, 2014 9:46 a.m. ET NEW YORK—Arabica-coffee prices surged Monday on renewed concerns about dry weather damaging the crop in top grower and exporter Brazil. The most actively traded futures reached $1.9680 a pound, the highest price since March 17, in morning trade. Arabica for delivery in May on the ICE Futures U.S. exchange was recently trading up 3.5% at $1.9145 a pound. The impetus for the latest jump in the market, which has soared 9.7% since Thursday, was a report from Brazil's National Coffee Council. On Friday, the CNC lowered its estimate for the current harvest, which is expected to begin in May, from about 44 million 60-kilogram bags of coffee to between 40.1 million and 43.3 million bags, because of the "unexpected climate situation this year in Brazil's coffee-producing belt, with a lack of rain especially in January and February." Those two months were the driest in Brazil in 30 years, according to Somar Meteorologia, a São Paulo-based private weather service. A lack of moisture can stunt the maturation process of coffee cherries, the fruit surrounding the seeds that are roasted to make coffee beans. "Numbers like the ones we saw to end the week are pushing most (traders) to take the safe route and lock in long positions," said Hector Galvan, senior market strategist at RJO Futures in Chicago. "I would believe that we are quickly on our way to close above the $2 (level) and likely stay above it for some time." Dry weather is expected to return to Brazilian coffee-growing areas through at least next week, traders and analysts said, after sporadic rains throughout March. "The weather is turning dry and will be very, very dry until Friday or next week," said Hernando de la Roche, senior vice president at INTL FCStone in Miami. Prices for arabica coffee, which is prized for its mild flavor and typically used in gourmet blends, surged to a more than two-year high of $2.0595 a pound on March 13, because Brazil grows more than half the world's supply. In February, prices jumped 44%, the biggest monthly increase in almost two decades. But as rains returned to growing areas, traders and investors took some profits and prices fell as low as $1.7115 a pound on March 21 before rebounding. Now, traders are also worrying about next year's production. Brazil's CNC also lowered its expectations for the 2015 harvest to between 38.7 million and 43.6 million bags of coffee, down from an earlier estimate of 43 million to 44 million bags. "With the damage that is being done right now, we're not going to be likely to produce a better crop next year," said Sterling Smith, a futures specialist at Citigroup in Chicago. The risk of a frost as Brazil enters its winter in June could also boost prices, Mr. Smith said. "Any frost activity would have a larger effect (than usual), particularly on the new branch growth which is critical for next year's crop," he said. In other markets, cocoa for delivery in May on ICE was recently less than 0.1% lower at $2,965 a ton, and orange juice for May delivery was 0.5% lower at $1.5325 a pound. Cotton for delivery in May was down 1.3% at 91.24 cents a pound, and raw sugar for May delivery was 0.6% lower at 17.25 cents a pound |
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