The week went out with a shrug, as both KCN and KC2 (U) suffered an equal 390 point 5 day trading range, the top 140 of which were last seen Monday. For historical context, Christmas week 2015 outperformed the past 5 days, with 425 points of gross travel, and the last time a range this small was seen in the N contract was Christmas week 2014 when KCN traded inside 315 points. If one considers a 2nd month continuation instead, trading was last this tedious in October 2013, when a 365 point range was set. Similarly uninspiring trading persisted at that time, with many traders anticipating a trip sub $1 at the time, only to have a historic drought in Brazil awaken KC from its slumber. While one cannot count on such an event recurring, upside calls were again very much in focus today as the Q 150 C traded 1200+ times and the N 130 C & U 140 C both trading 500+ apiece. Many traders focused on forthcoming cool weather in Brazil, and the accompanying wishes for a more interesting environment. For such little volatility, day to day open interest changes should keep COT watchers engaged for yet another week, as consecutive 3000+ lot changes were posted. With most roasting shops shuttered today, and origin still largely dormant, one suspects participation will be better next week following the resumption of work. Yet with the traditional beginning of summer now upon us, hopefully the week’s (non)events do not foretell what the market will subject its participants to in the coming weeks. ECF stocks were updated for March, reflecting a 0.2% drawdown, while the Vietnamese General Statistics Office estimated May shipments at 170,000mt, a 60% increase YoY, and April’s number were revised 16% higher. The VN numbers have been greeted with some skepticism vis a vis other official numbers released and the noted disparity between them. The Colombian Central Bank hiked overnight repo rates by 25bps as inflation sits at 7.9%, well above the target band of 2-4%. The COT showed a decrease in the Net Non-Commercial long to 3046 lots on a mix of new shorts and long liquidation. Commercials stand at -40,493 with short covering prevailing.
A 95 point session with a double bottom at yesterday’s low of 12120 basis July. Volume was decent at 39,074 lots with 15,536 spreads accounting for the lion’s share of the day’s volume. July/Sep traded 8,000 times between -195 and -185, another 2,000 July/Dec traded between -475 and -455 under and 2,800 Sep/Dec changed hands between 285 and 275 under. A surprising 3,448 lot increase in open interest is indicative of funds adding shorts while the grind lower in price action proves there is a willingness from industry and short term specs to absorb the selling. London traded in a $16 range at the lower end of the recent sideways range yet similar to New York a new low of only $1 failed to attract momentum to the downside. Tomorrow could provide some greater volatility as both markets will be closed on Monday for Memorial day in the States and the U.K.’s Spring banking holiday.
A third day with a very similar trading pattern wherein the previous day’s low was breached but there wasn’t any follow through. For what it’s worth the low for the past 2 sessions was posted just shy of 1 pm, but the “bounce” into the close amounted to all of a tepid 40 points. It is frustrating to summon inspiring input following a 170 point trading range which followed Tuesday’s 175 point range and another weak close in the face of a green macro, so pardon the brevity but if you don’t have something nice to say keep your mouth shut! Across the pond the market traded sideways in a 1633-1668 range for a 5th day running. Option volume however was brisk with 6,548 calls and 1770 puts traded, buoyed by 2000 of the Sep 1550/Jul 1500 diagonal call spreads trading at 15 points to the July. We await a catalyst.
A resumption of the unravelling of the rally from 11890-13560 as the Arabica market has now fallen freely 1375 points since the highs posted a week ago. Dealings were orderly and lackluster despite the early morning news of a major price leading roaster dropping prices an average of 6% in response to “sustained declines” in green coffee costs and noting that they do not see green coffee prices changing “significantly”. Conab also came out with an estimate of 49.7 mln bags for Brazil’s crop which was greeted with the all the enthusiasm of “please pass the salt”. From 8am until the close the market lulled about in a 110 point 12265-12155 range pressured by persistent systems fund selling, while industry was comfortable in letting the market come their way to take on some additional cover below yesterday’s low. We have been in a range bound market for the past 7 months and conventional wisdom would say to expect those who have been successful in trading the range to look to reenter on the long side as we approach the 120 level, that is lest the calendar and crop flows dictate a justification for patience.
Folgers coffee maker J.M. Smucker to reduce prices in U.S. - Reuters News
24-May-2016 08:17:35 AM
May 24 (Reuters) - J.M. Smucker Co SJM.N said it would reduce prices of its U.S. packaged coffee brands, including the Folgers and Dunkin' Donuts DNKN.O, in response to sustained declines in coffee bean prices.
"For the last several quarters, lower green coffee costs were reflected in promotional pricing for the majority of our packaged coffee products, and we do not anticipate those prices changing significantly," Steve Oakland, the head of Smucker's U.S. food and beverage business said. (Full Story)
The price decreases, at an average 6 percent, exclude the company's K-Cup pods.
(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Don Sebastian)
Vietnam Coffee-Premiums rise, rain returns to key growing area - Reuters News24-May-2016 05:34:41 AM
HANOI, May 24 (Reuters) - Vietnamese coffee premiums rose slightly this week following a drop in robusta futures, while the country's exports of the commodity have jumped by around a third, according to traders and government data.
The rainy season has returned to most of the Central Highlands coffee belt, responsible for at least 80 percent of Vietnam's coffee output, state forecasters said.
The rain has contributed to easing global coffee prices. ICE July robusta LRCc2 settled down 1 percent at $1,643 per tonne on Monday. The contract hit $1,707 a tonne last Tuesday, the highest level since August. (Full Story)
Robustas eased to 35,800-36,200 dong ($1.60-$1.62) per kg in Daklak, Vietnam's largest growing province, from 36,500-36,700 dong last Tuesday. COFFEE/ASIA1
Premiums of Vietnamese robusta grade 2, 5 percent black and broken widened to $30-$40 a tonne to the July contract, from premiums of $20-$30 a week ago.
Differentials and futures often move in opposite directions.
"The export volume is high and stocks are also plentiful now," said a trader at a foreign firm in Ho Chi Minh City.
Vietnam has exported 67,000 tonnes of coffee in the first half of May, up 29 percent from a year ago, based on Vietnam Customs data.
The shipment brought the coffee exports since the start of this year to 732,600 tonnes, up 36 percent compared with last year.
However, the Vietnam Coffee and Cocoa Association has yet to revise its last month's forecast of Vietnam's annual coffee exports this year, which envisaged the volume dropping 25 percent from 2015 to 1 million tonnes. (Full Story)
"The volume for the whole year still depends on farmers' willingness to hold or to release stocks," Chairman Luong Van Tu told Reuters.
In the Central Highlands coffee belt, the rainy season has begun in Dak Nong province, the region's third largest coffee-growing province after Daklak and Lam Dong, the provincial weather station said in a report.
In Daklak, the drought has now ended and water levels in rivers and streams are rising following recent rains, said a report by the Daklak hydro and meteorology station.
(Reporting by Ho Binh Minh; Editing by Sherry Jacob-Phillips)
©Thomson Reuters 2016. All rights reserved.
Good Morning!! July coffee closed sharply lower yesterday and pushed down to the lowest level since May 6th. Fears that the Brazilian harvest will pressure global coffee prices are gaining further traction, with the market now seeing evidence of strong Arabica production in the states of Minas Gerais and Sao Paolo. There is daily rainfall in the forecast for Vietnamese growing regions through the middle of next week, which also weighed on coffee prices as it will provide some relief from the drought conditions seen over the past few months. Outside market forces were also weak and were highlighted by a sharp selloff in the Brazilian currency that could further encourage exporters to market their supplies to foreign customers. ICE exchange coffee stocks fell by 1,043 bags on Monday, and are continuing a trend of falling to new multi-year lows that reflects a positive tone for global demand. Extended wet weather over Vietnam diminishes one of the major bullish supply developments that have supported coffee prices this month, which could set the stage for a retest of the early April low over the near future. Near-term resistance for July coffee is at 126.15 while support is at 119.92 and 117.70.
Coffee continued its fall from grace as another gap lower in KCN presented itself on the open. The story was the Federal Reserve, as yesterday’s post close minutes release seemed to put a potential June hike at the forefront. Commodities generally, and coffee specifically, found themselves under pressure along with the currencies of commodity producing nations, as the BRL spent much of the session outside 3.60 and the COP was -1%. The opening dump was dramatic though quickly recovered, and the quiet remainder of the European session would be the last moments of comfort for the bulls. The active Americas’ trading day comprised an ugly slog lower, broken up only by occasional fits of intense selling, with the period shortly after 11am EDT being particularly dispiriting. Intriguingly, Robusta found a willing buyer throughout the day, catching the eye of many a trader. The arb gained a fair bit of attention, and it is possible the RC strength was the function of a trader or two with a particular axe to grind on the strategy. With a settle 2 ticks below the 100 day MA in KCN, and the 26, 50 and 200 now above settle in that contract, the market will have some work to do in order to climb back into the top of the range. The KC2 chart is mixed, yet solace will be in slim availability for the longs.
New York coffee futures gapped down for the second consecutive day then continued steadily lower throughout the active trading period, cutting through support levels like a hot knife through butter. Selling was again mostly speculative, intensified by continued dollar strength, encouraged by similar weakness across the commodity spectrum. The dollar has eased off to near unchanged after the market's close. The S&P 500 has rallied from the seven+ week low to trade only marginally lower.
75% retracement of the move from the May 4th low (118.90¢) to the May 17th high (135.30¢) is at 123.00¢ in Jul16 KC tomorrow. Resistance around 126.45¢. Daily uptrend from March 25th at $1627 in Jul16 RC.
July New York (KCEN6) settled one-quarter cent from its low (5%), down 6.15¢
50.43¢(-4.7%). Volume was thirty-five percent above average at an estimated 54,100 lots including an estimated 888 EFP's, 77 EFS's, 724 TAS and 17,239 spreads. 6,430 calls and 5,554 puts also traded. The KCEN6-LRCN6 arbitrage: 50.43¢. Ratio: 1.6787. €: $1.1202-0.1%. BRL: 3.5651/$ unchanged. CRB: -0.8%. Crude oil: +½%. S&P500:-0.3%. Open interest: 186,537-947 (50-day stochastic: 37%; 125-day: 53%).
Fourteen notices were issued bringing the total for the completed delivery period to 1,332 lots.
July London (LRCN6) settled near its low (10%), down thirty-one dollars. Volume was eleven percent below average at an estimated 15,580 lots including 3,917 spreads and 1,113 EFP's. 4,160 calls and 953 puts also traded. Open interest: 109,404+60 (50-day stochastic: 14%; 125-day: 12%). No tenders were posted.
Brazil will produce 55.950 mln 60-kg bags of coffee in 2016/2017, USDA's Foreign Agriculture Service attaché estimates, up from 49.400 mln bags in 2015/2016 and 54.300 mln bags in 2014/2015. Exports are expected to rise in 2016/2017 to 35.230 mln bags from 33.330 mln in 2015/2016. 2014/2015 exports they put at 36.570 mln bags.
Both London and New York gapped lower on the opening (RCN 1691-1690, KCN 13225-13215),and, while London managed to close the gap, New York’s proved to be the high for the trading session as the commodity complex went on the defensive in the face of a strengthening dollar. Brazil’s real led the selloff among major currencies, falling 1.5% (3.5450 at print) as investors priced in the probability for rising interest rates, following a spate of modestly encouraging economic readings. Short term specs were the best sellers on the day as the market found resistance at the upper end of the trend channel while systems buyers disengaged. Managed money and trade express apprehension in chasing a market that has rallied 16 cents higher (13.7%) since the 4th of May and the state of Brazil’s harvest is inconclusively debated. Today was the first day in 10 the Arabica market traded a lower low and a gap now exists above (13215-13225) and below (12660-12665) and while some encouragement can be found in holding Tuesday’s low, the sense is buyers of choice would like to see a greater pullback for reentry.
New York coffee gapped down, falling as much as 3.30¢ in its first hour, retraced two-thirds of that loss then went out trading near the lows. Stops were triggered below a daily uptrend line dating back to May 5th. The 9-day slow stochastic slipped into sell mode. First support at Monday's low (128.80¢ in Jul16), then at the bottom of the May 6 chart gap - 126.60¢. Jul16 London gapped down as well, rallied to fill that gap, then fell back to close at a three-day low. The slow stochastic fell into sell mode as well. Support in the daily window between $1649 and $1617. Feb 25 daily uptrend line at $1622 tomorrow.
The trade-weighted U.S. dollar index rallied to a 3½-week high.
July New York (KCEN6) settled in its lower third (31%), down 2.60¢. Volume was seven percent above average at an estimated 42,485 lots including an estimated 1,088 EFP's, 40 EFS's, 574 TAS and 15,767 spreads. 2,880 calls and 4,018 puts also traded. The KCEN6-LRCN6 arbitrage: 53.82¢. Ratio: 1.7109. €: $1.1226-¾%. BRL: 3.5541/$-1.8%. CRB: -0.1%. Crude oil: -1.0%. S&P500:-¼%. Open interest: 187,484+214 (50-day stochastic: 41%; 125-day: 56%). No notices were posted. The May16 contract has expired.
July London (LRCN6) settled near its low (13%), down thirty dollars. Volume was eighteen percent below average at an estimated 14,367 lots including 3,358 spreads and 911 EFP's. 1,355 calls and 2,300 puts also traded. Open interest: 109,344+1,870 (50-day stochastic: 14%; 125-day: 12%). Six original tenders were posted.
USDA's Foreign Agriculture Service attaché estimates that Colombia will produce 13.300 million 60-kg bags of coffee in the 2016/2017 crop year, down from a revised figure of 13.600 million bags in 2015/2016 (originally 13.400 mln). Exports are forecast to rise to 12.330 mln bags from 12.310 mln (originally 12.230 mln).