Arabica lost 350 points, settling 131.20, while Robusta fared better, shedding $9 to 1380. With KCK fnd now 4 days away, volume has moved emphatically into the July contract. Trading was choppy & somewhat dull overall, yet 2 distinct selloffs were the story of the day. With futures peaking around 8am (135.30, just off the opening high prints of 135.45), a slow atrophy began as coffee failed for a 3rd day at the upper Bollinger band. Motivated buyers were hard to find and for a 20 minute span from 8:45 to 9:05 KC lost 250 points, ensuring an outside day with what was rapidly appearing to be a bearish reversal. While KC recovered from there, chopping about for the next 3 ½ hours as the BRL and DXY both gave increasingly positive signals, a lack of follow through gave free reign for sellers to reengage. Around 1000 lots were sold at 11:52-11:53, pushing KC back into Tuesday’s breakout zone and piercing the KCN 50 DMA in the process (yet not the KC2 continuation). Things appear a bit mixed going into next week, with the outside reversal on the daily uninspiring yet oscillators mostly neutral, MACD positive, a higher low, higher high, positive close on the weekly chart, and Arabica holding above that breakout area on the chart. Bloomberg notes that “since August 2018, arabica coffee crossed below this level 20 times and fell an average 0.6% in the next five days,” hardly an inspiring trade, and recent crosses and re-crosses both directions (3/16 to 3/30 and 4/6 to 4/13 most recently) exhibit the difficulty in relying on such single indicators, particularly in a ranging market. An out of consensus GCA draw (111,409 bags MoM, 344,406 YoY) did little to boost bullish sentiment, even with prevailing expectations for a build. Brazilian certified coffees approaching 1mm bags (930,330, up 10,240, 49.4% of the entire inventory) are providing a psychological and empirical counterweight overseas to the otherwise strong US data. The Robusta COT showed little net change (+778 lots to -7442, the least short positioning since February) on the commercial side as Managed Money liquidated 3190 longs and added 348 shorts for a net 3538 lots of selling, with Other Reportables taking on 2547 lots of that with a net buy.
May Arabica closed 127.85, +1.10, while May Robusta was unable to keep pace en route to a positive 1345, +16 close. Day 1 of the index roll saw the expected focus on spreads as outright trading in the front two months came in 4100 lots (27%) below the 2 week average, yet total volume shined thanks to 29k spreads, the second most since Feb 11th, slightly behind Tuesday’s activity. OI & trading activity both remains focused in the May contract for the moment, though this should change in the next couple days. KC didn’t quite manage a 2c range, spending the early hours in quiet ascent, bottoming out with the BRL at its weakest point of the day around 10:20am EDT, while chopping its way higher. Traders seemed fairly disinterested overall, focused on the roll and lacking motivation with prices off the lows but still just off the lower end of the core range. On the option front the structure (N -1.90 C 2000x, 1850 of them via the -1.90 C/ -2.10 P fence) and K 130 C (1378x, settled 47) were the focus of the day, the latter boosted by tomorrow’s May option expiration. OI entered the day at 4528 lots in the strike. Brazil certs declined 1300 bags of a total 5897 bag dip, the first decline since March 18th’s 325 bags and more than doubling the 570 bags that had made up the 3 prior days of net Brazil draws going back to the beginning of this year’s grading campaign.