INTL FCStone Daily Coffee Report

After an aggressive selloff in yesterday’s session on the back of weak emerging market currencies, ICE Coffee prices felt the pressure of bearish momentum and the weight of the December options expiration today.  Spot December futures settled 240 points lower and the now active March contract 260 lower to end at 159.45 and 163.05, respectively on huge volume of 105,786 lots.  Incredibly, the majority of that massive trading volume came on the back of spread action with over 41,000 spreads across the futures curve on the last day of the official index roll period ahead of the December tender period which begins on November 21st.  The Brazilian Real traded to a 3.49 low before recovering to slide only 4.95% for the week against the US Dollar.  Weekly losses for the Colombian Peso, Mexican Peso among the rest of the emerging market currencies fed into the speculative liquidation in the Coffee market.  Good origin selling volumes also added to the decline in prices, while industry buying was seen in a scale down configuration.  Technically, “C” prices completed a key reversal on the weekly chart suggesting further downside risk.  The weak performance came despite reports from Brazil of reduced coffee exports in the month of October compared to last year as well a report suggesting that domestic consumption continues to increase in the world’s #1 producer.
 
London Market-The Robusta market endured further losses to close the week $153 lower, the largest weekly fall in values since March 2015.
A $16 fall off the opening bell was a result of additional final hour weakness in New York last night, which set the tone for a further session of negative price action. Having remained absent through much of the week, scattered origin selling returned to provide further downside pressure, though movements in the BRL remained the significant drive to moves lower. Though early commercial buying eroded much of the opening gap, fresh weakness in the Real saw intra-day shorts emerge, eroding scale down roaster buying in good volumes through the session, breaching the 50 day moving average en route.
The demand for additional downside protection generated good turnover in the options market with 2675 lots of the Jan 2000 put purchased at $48 with a 36% delta at $2050.