ICE Coffee Futures Close 465 Higher
Arabica coffee futures had a positive close today helped by news of adverse weather conditions in Central America. The nearby contract for September delivery closed 465 points higher at 188.75 cents a pound. Activity was moderate with a volume of 21,432 lots including 6,841 switches. The nearby switch widened 15 points to close at -4.40 cents. According to MDA Weather Services, rains in the past two months were 10% to 30% lower than normal in Central America producing regions. Forecasts for the next 6 to 10 days indicate the possibility of light rains which would not do enough to ease the situation. The strengthening of the real discouraged local selling in Brazil. The real closed at BRL 2.2645 from BRL2.2722 it settled yesterday. After the close, another Brazilian coop announced their outlook for reduced harvests due to the drought. Cocatrel expects to harvest 900,000 bags during 2014, down 40% from 1.5 million in 2013 and 15 to 20% lower for the 2015. Cocatrel is located in Tres Pontas, south of Minas Gerais. During the week, Arabica prices recovered 7.90 cents per pound or 4.36%. The activity was dominated by spread trading ahead of first notice day for September on August 21st. US July green coffee stocks increased 386,860 bags to 6.043 million bags compared to the same period the year before. London - There was little change in the trading pattern for Robusta with the sorting out of the September exposure generating a decent part of morning turnover. The switch discount recorded little change around $12 with a few clips of business lifting volume into the session. Light selling followed weakness but the outright volume was thin. Influence of option exposure becomes more important before the September positions expire next Wednesday. The 1950/1900 strikes carry over 6,500 puts. Interesting with the physical market so slow that despite the volatility in the Futures differentials had recorded little change in the last 2 weeks with the standard grade discounts around $40. The open position in September finally slipped below November which suggested a change in focus into next week. Overall exposure was actually higher for the first time this week. Prices broke down some of the longer term averages putting pressure on the managed money longs which have just moved exposure out of the September with closer working stops. Price lifted well into the close trapping intraday positions as the board settled around session’s highs but not enough to reverse the downside break of this week.
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ICE Coffee Futures Close Lower
Arabica Coffee futures for September delivery closed 115 lower at 184.10 cents a pound this Thursday in a slow session driven primarily by spread trading. The Sep/Dec spread reached a low of -4.40 closing slightly higher at -4.25 with a total volume of 10,951. Total volume reached 33,187 lots. With regards to technical, December futures have established a comfortable trading range at the 180-190 level in which the market is likely to trade until further information is revealed about flowerings in Brazil. Open interested for August 13th increased 1,146 lots to 160,105 lots. London - Lack of volume was the main issue for London during the morning session with selling above the market gravitating to the price action. A build of selling above the board was noted from the opening stages which comprised of a mixture of sources. The structure continued to tidy up positions as the market moves through an important transition with the spot month exposure. After the activity yesterday the overall open position recorded little change but for the moment the spot month open position holds just above the November exposure by a token 500 lots. Arbitrage was interesting as value widened on the back of the intraday covering rally in New York taking the Nov/ Dec premium out towards 102 cents which provided the idea of covering pushing New York. The market is still searching for demand as traders return for summer vacations but activity is slow to start. New crop from Vietnam is still months away despite expectations that it will be early as seems to be the norm over recent years. The influence of the underlying Put strikes on the September options could become a downside draw for the price action as we move into next week and the expiry next Wednesday 20th August. |
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