ICE
Coffee Futures Settle Lower but Off the Lows
Arabica coffee futures settled
lower but recovering from early losses. The active
contract for July delivery closed 105 points lower at 127.70 cents a pound
while the September contract declined 125 points to 129.60 cents a pound. A
heavy number of switches boosted the volume that reached 63,212
lots. The active July-September switch narrowed 20 point to end at -1.90
cents. The prices were pressured early on origin selling and the
London market action, however short term spec short covering made prices to
recover. In Brazil, the real reversed course and closed with gains
following a sale of more than USD$2 billion swap auctions by the central
bank. The real traded down to BRL 2.16 before to the bank’s intervention
but bounced to end at BRL2.1350. Commodity and equity markets fell today
following comment from the Bank of Japan’s Governor Kuroda saying that there is
no need to extend monetary stimulus.
More volume
coming together as the board worked lower with the combination of more system
related selling adding to origin which created a powerful combination into the
session. The July structure widened as origin selling pressured the spot month
influenced by weaker currency in Indonesia. Vietnam selling which had been
building above the board adjusted to compete with the spec selling which drove
the weakness. The July discount pushed out towards $25 opening more
opportunity to get hedge books down the board before another wave of managed
money rolling lifted the discount into the afternoon boosting the volume. Over
the last 2 days grading has increased as coffee moves sheds into a delivery
position. Another 115 lots were approved today taking the cumulative total
approved this month to 323 lots of which 90% has been from Indonesia. As
traders update their export numbers from Vietnam the final May numbers is
likely to be near 115,000 tonnes which compares with 190,000 tonnes in the same
month last year. The figures for July last year reached 141,000 tonnes with
many traders expecting a number below 100,000 for this year. Differentials have
weakened but overall remain strong. The combination of spec and origin
selling maintained pressure into the closing sequence as the board traded to
new contract lows encouraging the technical configuration attracting fresh
positions.
ICE Coffee Futures Slide Down
Arabica coffee futures fell back again today after two days
of small gains. A weaker real in Brazil incentivized exporter selling, and the
active contract for July delivery fell 135 points to settle at 127.65 cents a
pound. Volume, still mostly generated by switches basis July, reached 31,000
lots and set a good pace for the beginning of the week and the month. Brazil’s
director of monetary policy, Aldo Mendes, stated that the real’s weakness was
inevitable as a part of the global trend of currencies devaluing against the
dollar. The real closed at BRL2.1348, just shy of the 2.15, a level it last
reached in 2009. The Brazilian government also announced an 18% increase to
farm credit for the 2013/14 season, reaching a total of 64.2 billion USD
available for financing operations to improve production in grains and soft
commodities. With the market facing lower again, ICE futures will be looking to
125 basis July as the near technical support while 130 remains the near level
of resistance.
London: Volume struggled during the
early stages with the board once again lower with the turnover looking towards
the structure. The July discount edged slightly narrower trading towards $28
but not in the same volume as we had recorded into weakness which was the
important fact of the morning. Nothing showing for grading during the opening 2
days of June but the focus will be on movement of stock in consuming countries
particularly if we move into the slower off take period and the Exchange
position starts to decline which is a possibility with the origin situation as
it is with differentials strong. Little change in the characteristics of the
London Terminal with the board comfortable in probing lower but at the same
time not inducing fresh involvement as the lack of volume reflected. Well into
the Indonesian season and we are yet to have any impact upon the futures
market. Exports out of Sumatra are reported well above last season during the
month of May, but that was to be expected as the volume broke 22,500 tonnes to
record the largest monthly performance since February when old crop stocks were
moved. Trading range remained tight into the second part of the day as the
board operated around unchanged but still not doing enough to test any resting
origin selling which materialized again above the board both in July and
September. No change to the technical format with the board looking to test
towards the lows back last December of 1855 bases the second position unless we
can engage covering above 1920
ICE Coffee Futures Extend Gains
Arabica coffee futures extended the recent gains on spec buying. The active contract f
or July delivery settled 85 points higher at 141.75 cents a pound. Total estimated volume
decreased to 16,430 lots from 22,774 lots last Friday. The latest Commitments of Traders
Report released by on Friday showed that non-commercial increased their net
short position to 12,428 lots as of April 30 from 9,108 on April 23. The
commercial net long position rose accordingly to 12,677 lots from 9,752 over
the same period. In related news, Colombia production during April surged 85%
from a year earlier to 1.07 million 60-kilo bags. According with figures
released by FNC on Saturday, coffee output for twelve months through April
totaled 8.67 million 60-kilo bags, 22.5% higher than the same period the
previous year. The recover was attributed to good weather and a positive result
from the fungus control programs. In Brazil, market participants remained to
monitor the weather after the arrival of the first wave of cold fronts.
Temperatures are expecting to decline with lows reaching 6 C. without any risk
to the coffee plants according with SOMAR.
In London, the Robusta market was close due to the May Day holiday.
ICE Coffee Futures Plunge Lower
Arabica coffee prices moved sharply lower today motivated by speculative selling that
triggered large stop orders, a weakening of the Brazilian Real that prompted
exporter selling, and an overall deterioration of the technical picture. The
active contract for July delivery fell 5.55 cents to settle at 137.55 per
pound. Circuit breakers at the ICE were triggered for “C” futures as a
cascading stop situation pushed prices rapidly lower. A cascading stop is
characterized by the accumulation of stop orders that trigger other stop
orders, which hit yet more stop orders and so on; a condition that creates a
lack of liquidity and a price vacuum. Origin selling was also noted as weather
in Brazil coffee regions remains optimum while the harvesting period looms and
the Real weakened against the Dollar. Technically, near term support is seen
at the April 15th 133.55 low basis July.
London: Robusta recorded an active
opening sequence with the board uncovering a batch of sell stops below 2060 in
July which produced good opening volume. The action appeared to take the market
unawares with buying building into the market after the initial move lower.
Turnover was good with the action reflected in the May discount widening back
towards $30 before the market reverted to a tight operating range into the
balance of the morning. Prices came under increasing pressure into the second
part of the session as the board rolled over into another wave of selling which
followed weakness taking the board below a second trigger of 2050 looking
towards the 2000 marker. Flat price selling intensified with the weakness
taking out resting price fix buying. Prices found it difficult to find a level
working around the 2020 pivot level having turned all the main indicators lower
with today’s performance. The question from today will be to what degree we
have released “Managed Money” longs after such a performance. The working
number as of the last COT report at 17,033 was considered higher than expected.
The board was not in a position to recover the lost ground edging nearer to the
2000 bench mark into the closing sequence of the day totally turning indicators
and pulling in intraday shorts.
By Isis Almeida
April 23 (Bloomberg) -- Goldman Sachs Group Inc. lowered its price forecasts for arabica coffee futures in New York, citing an improving production outlook in leading grower Brazil. Prices will be at $1.45 a
pound in three, six and 12 months, the bank said in a report e-mailed today. That is down from previous forecasts of $1.55 a pound, $1.65 a pound and $1.75 a pound, respectively, it said. Arabica futures for delivery in July fell 0.6 percent to $1.4225 a pound by 9:14 a.m. on the ICE Futures U.S. exchange in New York.
Brazil will harvest 47 million to 50.2 million bags of coffee this year, Conab, the government’s crop-forecasting agency, estimates. That is down from 50.8 million bags a year earlier and may be a
record for a year in which trees enter the lower-yielding half of a two-year cycle. “Although 2013-14 is the low-yielding production year in Brazil’s biennial cycle, favorable rains in March point to an even larger off-year
crop, already forecast to reach record volumes,” Damien Courvalin, an analyst at Goldman Sachs in New
York, wrote in the report. “The arabica market will likely only be in a modest deficit or even remain balanced in
2013-14.” The improved outlook for the crop in Brazil means supplies there will compensate for production losses caused by coffee leaf rust disease in Central America, he said. The epidemic is the worst case since the disease appeared in the region in 1976, according to the International Coffee Organization in London.
Leftover Sales
While further cuts to production estimates in Central America may “provide modest support to prices,” sales of leftover stockpiles from the last crop in Brazil may “weigh on prices in coming months,” according to Goldman
Sachs. Brazilian growers sold 75 percent of the 2012-13 crop by March 31, down from 86 percent a year earlier, Gil Barabach, a market analyst at Safras & Mercado, estimates. The global sugar market is heading for
a third year of surpluses in the 2013-14 season that starts in October in most countries, the bank said. Excess supplies will result from a large sugar cane crop in Brazil’s center south, the main growing region of the
world’s top producer, and as growers continue to replant. “The increase in Brazil sugarcane crush will allow for
both an increase in sugar and ethanol production,” Courvalin said.
ICE Coffee Futures Climb on Spec
Short Covering
Arabica coffee futures climbed Thursday
supported by the weak US dollar and the technical outlook. The nearby contract
for May delivery closed 2.80 points higher at 138.90 cents a pound and the July
contract closed 395 points higher at 140.80 cents a pound. Short players were
forced to cover positions as the origin selling against the May position eased
and prices moved above the recent resistance levels. The US dollar declined
against major currencies following economic data showing the economy could grow
at slow pace in the near term. In Brazil, the undersecretary of finance for
agricultural sector rejected the idea of subsidies for the coffee sector.
Dealers and farmers have been waiting for several weeks’ government measures to
help the coffee sector.
London: Robusta continued to trade
around the same features as players addressed the spot month exposure with the
discount recording a slight narrowing during the morning session. Switch
interest extended further down the board with the July/ Sept trading out
towards $18 this week, before edging narrower during early trading today. No
Grading put forward today which means during the last 2 weeks the Exchange has
approved 220 lots in preparation for the updated stock report which will be
released after the close this evening. Spot month in London reflected the 2,000
Swap trades yesterday down 4,608 lots which still leave a working balance of
almost 21,000 lots which is still big. This numbers should start to fall away
quickly swinging into next week with the expected open position into delivery
period of 5,000 lots as an estimate. Taking encouragement from the intraday
rally in New York the board was able to break down the 2080 pivot in July and
move action above the better averages into the closing sequence of the market.
The move did uncover the first origin business of the week which was absorbed
quiet well. Against the flat price strength the spot month structure gave
ground easing back below the $40 discount marker. Prices must consolidate the
action to prove the break of averages into the weekend.
Arabica coffee futures for delivery in May lost 4.25 cents to settle at $1.3590 a pound, the lowest settlement in two weeks.
Top coffee grower Brazil exported 11% more coffee in March than a year ago, while Colombia's coffee exports that month rose 12%. Colombia's coffee production rose 7% in March, despite a two-week strike by thousands of the nation's farmers.
Higher shipments from the two countries--the source of more than one-third of the world's coffee--are helping to counter crop loss due to an outbreak of a coffee-eating fungus in Central America and Mexico.
The International Coffee Organization said in a report on Monday that increased production in other countries has "compensated" for the damage caused by coffee-leaf rust in Central America.
Arabica coffee futures closed higher Monday helped by news
from Brazil. The active contract for May delivery settled 125 points higher at
138.40 cents a pound. The market had a brief rally early in the morning after
buy stops were triggered above the 140.00 level for the May contract. News
indicating that the in the meeting in Brazil last Thursday, the proposal of
raising the minimum reference price was rejected for the moment, supported the
prices. The inter-ministry committee approved an extension of the loan repayment
until June 6. Traders were anticipating selling from Brazil that has been
delayed lately as producers hope for possible subsidies. A stronger real in
Brazil, also contributed to dissuade coffee sales. The real ended
at BRL2.0183 from BRL2.0202 last Thursday. Traders are anticipating a raise of
the interest rates in the next meeting of the Monetary Council on April 16 and
17. SOMAR, a Brazilian weather agency, reported heavy rains in the coffee
growing areas, which could affect the crop if it continues at its present
damaging pace.
European markets were closed today on Easter holiday.
Today’s Market:
·ICE Arabica futures May contract opened 10 points higher today at 133.20 cents a pound, and is currently trading higher at 133.50 cents.
·LIFFE Robusta futures May contract opened $3 higher today at $2158 a ton, and is currently trading lower at $2146.
·Various sectors of Colombia have withdrawn support from the Federation, citing poor management of the strike as the cause.
·The Euro is firmer on expectations that the European Central Bank will contain the Cypriot financial crisis.
ICE Coffee Futures Continue to
Slide
Arabica coffee futures were again under pressure Tuesday on producer and spec selling. The benchmark contract for May delivery finished 125 points lower at 133.10 cents a pound. Activity was moderate with the volume decreasing to 20,549 lots. Commercial selling remained mainly from Colombia but lighter than the previous session. Several coffee departments from the main growing areas withdrew support to the FNC’s
manager and asked for his resignation. In Brazil, a firm real discouraged producers selling. The real closed higher against the dollar at BRL 1.9845 from BRL 1.9869 yesterday. Coffee producers will ask ministers to support a higher price for the coffee, the President of the Agricultural and Livestock Federation of the State of Minas Gerais (FAEMG), Roberto Simoes, said. The government has helped prop up coffee prices in the past, Simoes explained, by offering to buy at a fix price on a specific date. The New York-London arbitrage narrowed to 35.3 cents/lb, the lowest settlement since December 31, 2008. Today’s settlement for the futures contract is the lowest since June 7, 2010.
London: Initial weakness off of the opening was well taken by scale-down industry buying and it was not long before the board started to stabilise. A lack of follow through selling soon prompted the market to reverse and a phase of spec short-covering saw the board steadily edge higher for the balance of the morning session. Values were only able to achieve single digits in the plus column before moving back into reverse on the
back of a weak ‘C’ contract. Business was generally orderly through the afternoon with Robusta being supported by arbitrage related buying. Only late in the session did the pace quicken to the downside, fresh spec selling
ensuring a close on the lows. At just over 10,000 lots the volume seems weak in comparison to the price action. Nevertheless, the poor settlement does point to additional losses short-term. Support lies in the shape of the 20-day moving average which only now starts to loom into view ($2135).
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