Arabica coffee futures for December delivery settled 195 points lower at 155.90 cents a pound. Rains developed on the main growing areas of Parana, Sao Paulo, y Minas Gerais and forecast of a more stable pattern of precipitations for next week, encouraged the speculative selling. The Espiritu Santo areas, main Conilon producer, remain dry. Volume reached 31,053 lots including 5,862 switches. The active December –March switch remained at -3.50 cents. Good volume was noted on the December 155 and 150 Puts. OI showed a large number of Puts (more than 22,000 contract ) from the 155 to the 130 strikes against the December position. The market action was also influenced by the technical picture. A well-defined resistance area at 160 could limit the advance in the short term. Oscillators slightly over-bought complement the picture for a corrective move.
London Market- London operated in subdued fashion with values hovering at the middle of the week’s trading range.
Prices fell $20 through the first hour as technical participants anticipated overbought conditions, though support emerged at $2113 for a third consecutive session, aided by additional roaster buying present in lighter volumes. Open interest fell 6565 lots representing the neutralisation of futures positions following yesterday’s Nov16 option expiry. Turnover through the Nov/Jan switch was limited as values weakened to $27, with November open interest now standing at 26,438 lots, of which half is held by the certified stock holder. Options activity simmered, with 200 lots of the 2250/2000 fence (to the call) traded in Jan, March and May, with upside protection continuing to be sought down the board.
Arabica coffee futures fell on Wednesday on slow dealings. The most active contract for December delivery lost 90 points to settle at 157.85 cents a pound. Weather report forecasting good rains for the main coffee growing areas of Brazil caused early speculative liquidations, however prices recovered after lack of follow through was noted. On Brazil weather news, the blocking pattern not allowing rains began to dissipate, allowing rainfall for the next 4-5 days, reported SOMAR. For the next week, heavy and more intense rains are expected, they added. Volume reached 25,261 lots including 4,296 switches. The active nearby switch widened 5 point to end at -3.50 cents. Good interest buying remains at -4.00 cents. On the options, activity continued on close to the money strikes for the December position, while a large clip fence on March 170 Call/ 155 Put was noticed. The real trading was slow as participants expect the COPON’s decision about the ZELIC rate tonight. The USDBRL reached 3.1688. Analysts are expecting a decrease of 25 to 50 base points. In addition, crude oil gained 2.25%, buoying emerging market currencies. In other macroeconomic news, the European Central Bank will announce their interest rate decision tomorrow morning.
London Market- London consolidated lower throughout the session, following two days of explosive movements higher. Additional buying propelled values $8 higher off the opening print, to the day’s high at $2161, where a double high now exists and which will act as a short term target to the upside. Origin selling remained absent with downside pressure provided through the liquidation of spec long positons. Roaster buying at the bottom end of the day’s range provided support, as prices bounced and firmed away from the session’s lows although in diminishing volume as the market moved back higher. November options expired today against a futures reference price of $2094, leading to 1,633 lots of open interest in the $2100 calls being abandoned. However, 16,995 lots were exercised between $1500 through $2050 call strikes, which should neutralised a large percentage of the Nov16 futures exposure to around 20,000 lots open.
The Jan 2000/1900 put spread vs selling the 2400 call traded 1000 lots with a 28% delta, buying 280 Jan futures at $2136. An additional 500 Jan 2150 calls were purchased at $83 alongside a 44% delta at $2136
Supported by strength in the Brazilian currency, coffee futures in London and New York continued strongly higher on Tuesday, New York to its highest level in eighteen months, London to new life-of-contract highs (and a 2-year spot high). Buying was mostly speculative. Origin selling was spotty.
The London market is in overbought territory with a 9-day RSI of nearly 86%.
December New York (KCEZ6) settled 75 points from its high, up 1.65¢. Volume was average at an estimated 31,365 lots including an estimated 873 EFP's, 18 EFS's, 335 TAS and 9,163 spreads. 4,507 calls and 5,011 puts also traded. The KCEZ6-LRCF7 arbitrage: 61.32¢. Ratio: 1.6279. €: $1.0978-0.2%. BRL: 3.1823/$+06%. CRB: +0.2%. Crude oil: +0.3%. S&P500:+0.7%. Open interest: 192,332+861 (50-day stochastic: 100%; 125-day: 84%).
January London (LRCF7) settled near its high, up forty-four dollars. Volume was climactically heavy at an estimated 42,071 lots including 16,144 spreads and 516 EFP's. 7,447 calls and 6,871 puts also traded. Open interest: 127,620-4,507 (50-day stochastic: 85%; 125-day: 68%).
The European Coffee Federation estimates that coffee stocks in Antwerp, Bremen, Hamburg, Genoa, Le Havre and Trieste fell 12,304 tonnes in August to 716,769 tonnes. This is down 3,570 tonnes from one year earlier. Bremen stocks have not been updated since August 2015.
The Green Coffee Association reports that U.S. warehoused coffee stocks rose 913 bags in September to 6,199,023 bags. This is 81,915 bags higher than the 6,117,108 bags in store at the end of September 2015. Over the 1989 to 2015 period, stocks fell by an average of 101,744 bags in September. (see charts)
ICE Europe reports that managed money was a net buyer of 1,901 10-tonne lots of robusta coffee in the week ending October 11th leaving them net long 33,728 lots. Swap dealers sold 906 lots (short 4,099). Non-reportable traders sold 626 lots (long 3,180). commercial traders sold 209 lots (short 40,873). Other reportables sold 159 lots (long 8,063).
Arabica Coffee Futures extended last week’s increase as the dollar gave ground and constant speculative buying eroded light origin selling. The active contract for December delivery increased 170 points at 157.10 cents per pound, reaching new intraday highs throughout the session. Volume did not accompany price activity, with 22,294 lots traded today. Origin selling was limited, with a banking holiday in Colombia. GCA stocks for the month of September were published today, showing an increase of 913 bags to 6,198,110 bags. The five-year average change for September is a decrease of 73,000 bags. In related news, Procafe Group reported a water deficit for key Arabica producing areas. According to Procafe, rains in September promoted opening of some buds, yet further rains will be needed to help flowers grow. Mixed weather forecasts for the next ten days heighten uncertainty in the market. From a technical standpoint, short and medium term stochastics are entering overbought levels as we approach the upper range of the 20-day Bollinger band.
London Market- Values exploded higher as fresh spec buying lifted January prices through $2100 to record the highest levels since February 2015. A subdued morning was not a sign of things to come as prices drifted higher with the dollar returning some of its overnight gains while outright prices ticked up to the double high at $2088. Once breached, resting buy stops signalled the entry of new long positions which eroded returning origin selling at good volumes. The psychological $2100 barrier failed to provide residence, continuing to absorb Asian selling which increased in volume. Significant options activity was present with 5500 lots of the Jan 2150 call purchased at $63 with a 40% delta at $2115. Additional options activity was generated through the May 2150/2300 call spread which was bought 1000 times at $48 with a $2109.
This week’s COT figures showed the managed money net long increase by 1901 lots to 33,728 lots with 2364 new long positions established alongside 463 shorts. A small increase of 209 lots was shown In the merchants net short position with fresh long and short positons generated in near equal volumes.
Arabica Coffee Futures for December delivery ended Friday’s session 270 points higher at 155.40 cents per pound. During the week, futures prices increased 7.4 cents, or 5% amid weather worries in producing regions in Brazil. According to Somar, rain in the Brazilian producing regions will become more scattered until Wednesday, where a cold front brings rains to Parana, Sao Paulo, and parts of Minas Gerais. The COT report showed managed money decreasing their overall position by liquidating over 3,000 longs and 1,000 shorts, decreasing their net long position by almost 2,300 lots to 36,849 lots. Meanwhile, commercial buying was noted with merchants adding 1,200 longs and only 334 shorts, decreasing their net short position to 78,471 lots. In related news, the ICO updated their supply/demand balance for 2015, showing a deficit of 3.3 million bags, higher than 2014’s 2.7 million bag deficit.
London Market- Stronger than expected Chinese inflation data provided an air of bullish sentiment going into the session, despite further dollar strength looking to act as a headwind to additional moves higher. With volume down on yesterday, a result of less turnover through the Nov/Jan switch, the market struggled to generate fresh momentum of its own accord. Strength in the ‘C’ contract gradually pushed London higher through the session, breaching yesterday’s high at $2053 where fresh Asian selling became visible. Open interest increased by a further 3082 lots, a combination of delta hedges from yesterday’s options activity as well as fresh longs added as values tick higher. Interest remained visible in the March 1900 put, with 1000 lots rolled from Jan, with $19 paid, as participants look to cheaply roll downside protection down the board with flat prices moving higher.
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Arabica Coffee Futures for December delivery settled slightly higher on Thursday, gaining 50 points at 152.70 cents per pound. Prices remained near the 20 day moving average (151.45 for dec) throughout the session once again, suggesting neutral levels. Speculative buying attempted to push prices higher, however the movement was capped by overhead origin selling, pushing prices back to the nearby oscillator. Short term speculators dominated the session, keeping prices on a tight range on lack of fundamental news. In related news, Japanese coffee inventories fell 4,477 tons during the month of August. Japanese inventories reached a record high during July at 210,762 tons. USA GCA stocks will be published tomorrow. November options expire tomorrow.
London Market-Spread activity dominated the session as nearby structure continued to weaken ahead of first notice day, while the Jan/March switch pinched into backwardation. Open interest increased by a further 2575 lots, with spec long positions running into fresh origin shorts as flat prices maintained the recent moves to the upside. Interest in the Nov/Jan accelerated with over 10,000 lots traded with values weakening $3 into the hands of the commercial short at -$35. Significant option activity occurred as 2000 lots of the Jan 1900/2050 call spread were bought at $99 with 560 Jan futures sold at 2073. Further upside protection was sought with 1700 lots of May 2300 calls traded at $61. Conversely 2000 March 1900 puts were bought at $38 with a 22% delta hedge at $2076 as participants continued to search for cheaper downside protection as the board moves higher.
Arabica Coffee Futures ended sharply higher on Monday, with the most active contract for December delivery settling 485 points higher at 152.85 cents per pound. Prices began the session firm, following Friday’s bounce from nearby support. Weather reports stating that rains will slow down in the coffee regions in Brazil attracted speculative buying. According to SOMAR, rains will weaken and the temperature will rise in most producing areas for the next 10 days. STOP orders were activated when prices broke through recent highs and the 20 day moving average on the upside, accelerating the movement. Strengthening of producing countries’ currencies on the back of crude oil’s recovery capped origin selling, which accompanied by speculative profit taking, brought prices down 100 points from the highs towards the close.
London Market-London continued to drive higher as flat price activity tracked additional strength in the ‘C’ contract.
An early retraction below $2000 was a result of final hour weakness in New York on Friday, where values bounced and pushed higher throughout the session. Consistent origin selling was present through the higher end of the day’s range which was absorbed as the market edged higher. The Nov/Jan switch attracted good volume as values weakened a further $2 to -$30, with spec long positions continuing to be rolled in the hands of the commercial short as November book management takes shape.
This week’s COT report versus disaggregated futures and options saw the merchants reduce the net short position to 40,663 lots, a reduction of 3100 lots. 1843 lots of this were fresh long positons reflecting roaster buying which an additional 1257 shorts were covered. The managed money community reduced the net long by 3182 lots, which now stands at 31827. Options activity remained with 350 lots of the March 2250/1900 fence traded (to the put) with a 52% delta at $2050.
The active contract for Arabica coffee for December delivery settled 180 points lower at 146.60 cents per pound. The pressure began early, speculative short covering brought prices 35 points higher. Prices moved lower throughout the entire session, breaking recent lows progressively. The downward movement accelerated once prices broke through the 50 day moving average (147.80 for Dec). The next support level can be found around the 100 day moving average (144.40 for Dec). A firm dollar and weak Brazilian real helped push the market down. The dollar reached highs not seen since August, in anticipation of tomorrow’s employment report.
London Market- With many heading to Geneva for the European trade’s annual dinner, the Robusta market started the day on a slightly subdued note. Overall turnover was light through the opening hours as buyers and sellers essentially cancelled each other out. A short-lived run to the day’s highs was quickly snuffed out mid-session as the board starts to look more comfortable operating into weakness than in strength. By mid-afternoon upward momentum in the Dollar began to attract more significant origin offers overhead, stymieing any fresh attempts to push higher and returning values to the bottom half of the day’s range. With a Fed rate hike in December looking ever more plausible, additional dollar strength is likely to act as a persistent headwind to prices as we run into the end of the year. Structurally the action was flat while options continued trade in good volumes. 1800 and 1900 puts by far the most popular strikes and a favourite for those funds still looking to buy some cheap price protection against existing longs.
Arabica Coffee futures began the session with technical strength, fueled by a constructive chart and reports of hail amid strong rains in Brazil’s coffee regions. Prices reached a high of 151.15 cents per pound for the active contract for December delivery. The climb was capped after prices failed to break Monday’s high and the 20 day moving average (151.70,151.50 respectively for Dec). Strong rains were reported in Brazil’s coffee regions, which pressured the market lower. Dry weather is expected for the weekend in most of Brazil’s coffee producing areas. In related news, Colombian coffee production for 2015-2016 exceeded 14 million bags (up 5% yoy) while exports totaled 12.34 million bags (up 0.5% yoy).
London Market-It seems the recent phase of corrective price action may be coming to an end as values turned sharply higher today, although in the grand scheme of things volume is still subdued. Outright activity was flat through the morning as many traders stood on the sidelines. Even the pace of business in the nearby structure ran below par: a lack of fresh fund rolling allowing the nearby discount a rare respite from weakness. With roaster buying persistent into the bottom end of the near-term trading range and with origin notable only by their absence at these lower levels, it took only a little prompting from the ‘C’ market to bring a heady mix of trade buying and short-term spec short covering into London. Strength in the Brazilian real only helped to accentuate the move; dragging prices higher as the board continues to operate comfortably to the upside. The $2000 mark, (once a short-term upside target) is once more very much within reach.
A quiet session for New York which spent the day trading in a 190 point range scoring a 3rd day lower high’s and a 5th of lower lows. With London under pressure, New York traded in a downward trajectory until the lows were in place at 8:30, then proceeded to vacillate on either side of unchanged until the close, ultimately settling down 10 points on the day. With rain in the forecast for both Conilon and Arabica regions of Brazil, and with the market 14 cents off of the highs posted on the 22nd of September (160.90), upward momentum is fading, as those willing to buy the market on dry forecasts hold back, and the systems funds which have been the best buyers into strength on the bull run are not signaled to add to long exposure. Industry getting more active albeit at a structured pace, as prices pull back in both NY and London. We have now settled below the 40 and 50 day moving averages basis KCZ the past 2 days for the first time since the 31st of August, meanwhile the RSI and ADX are sideways, indicative of fading momentum and a lack of trend strength.