ICE Futures Close Week With Severe Volatility
Arabica coffee futures whipsawed violently today, trading in a 1000 point range before finally dipping lower again to settle basically unchanged. The most active contract for March delivery settled only 5 points lower at 135.70 cents a pound, unable to hold above the 142.50 level. The March contract settled the week 1,915 points higher from last Friday’s close at a price last seen on July 18th, 2013. As typical of a weather market, participants remained highly vigilant of any minimum detail that can indicate any change of direction, causing a lot of volatility on the prices. In today’s session, an initial top on the recent highs prompted a rapid liquidation. Weather concerns have eased as Somar forecasts rain patterns entering Brazil on February 17th. Despite the expectations of precipitation, producers in Brazil express grave concerns over the damage already caused to coffee plants, noting stunted plants and damaged grains as dry conditions impair plant development. The active March-May switch widened 5 points to end at -2.15 cents.
London: Robusta was looking at an opening forecast of $110 lower. Since the change in market hours this week we now have an actual forecast for the opening of London to work with. The market opened with a burst of selling which was absorbed as the lower market uncovered a mixture of buying interest quickly taking the market back to above the option strike of 1800. The release of certified stocks last night went into the market almost unnoticed with another reduction of 281 lots adjusting to a new working position of 2,496. No change to the pattern but little was expected – No grading and coffee arriving is not appearing in non-certified stocks either. Movement of the” Managed Money” style long has been interesting with positions visibly moving across to the States which should reflect in the COT numbers on Monday. Rolling out of the spot month reflects in the changes in the open position as the exposure quickly falls away and the premium retraces. This morning it contributed the bigger part of the turnover with the premium down to $8. Exposure in March has started to fall quickly this week down 7,000 lots the last 5 days. Prices have lost momentum over the last 2 days settling back to the levels of last Friday which immediate suggest prices will need to test lower first to re-group. The 1750 marker in May could induce option related selling which needs to be watched.