Arabica lost 95 points, settling 98.15 in choppy trading ahead of the index roll tomorrow. Futures opened down but steady, weakening on the open and holding mostly constant during the European hours. 8am buying marked a new high and suggested additional spec shorts were covered following yesterday’s close, but things unraveled quickly thereafter. A combination of weak commodities, strong dollar, weak brl, and risk off all coalesced allowing intraday specs to take control and wrestle KC prices lower. With trade content to job what appears to be a range for the near term and origin and roaster both apparently willing to wait before initiating further large scale positions, the day unfolded as one might imagine – supported into weakness, sold on strength, and generally following the path of the FX and commodity markets. N/U enters the roll period having shed yesterday’s 10 point gain with an equal loss, closing -1.55. N/N weakened 10 points as well to -9.00. Volumes were middling in every way as N and U outright trading saw their lowest volume since May 20th. Total volume was also at its least impressive since the same day, while spreads saw a small uptick from Tuesday, but otherwise was also at a low since May 20. Robusta was holding strong again until the settlement when prices plunged dramatically in verticality if not amplitude. In the end the books were marked 1196, -6 on the day as N/U gained another $2 to -14, only $3 off the -11 double top and 52 week high of April 8 & 9. Robusta certs fell another 7300 bags equivalent, leaving it a mere 65k bags from cracking the 2 million mark after standing at 2.23mm at the end of April and 2.395 at the end of March.
Coffee rallied 90 points, closing 99.10, posting strong gains between 8am and 9:30am NY time on a combination of recent spec shorts covering, roaster buying, and the BRL proxy trade as the FX climbed steadily higher. After reaching a peak of 100.75 in KC, trade profit taking seemed to initiate fresh short term system selling, briefly sending prices back into negative territory. The BRL however kept going, maxing out at 5.0181, and jobbers covered shorts for the final positive print. Spreads were strong across the front 3 switches, gaining 10 points in each, and closing 35 points higher at -8.90 in NN. NU went out -1.45, inside the recent range and stronger for a second consecutive day ahead of Friday’s index roll commencement. London also saw positive flows, outpacing her sister market on a relative basis, 1202, +23. Both spec and roaster buying was noted down the board. N/U pushed steadily higher as well on heavy volume (6200+), closing -16, +3. Both markets are recovering recent losses in what is otherwise largely consolidatory trading, each now only slightly oversold on a technical basis.
Arabica lost 10 points closing 98.20 after a session of mostly positive trading. Early hours were quiet and spec selling was noted at 8am, but the weakness was short lived. Motivated buying arrived shortly around 9am, pushing prices steadily higher for the following hour. KC tracked the BRL for the majority of the day, which of note has strengthened over 13% since early May but lost some footing leading into the settlement period while giving back 1.45 into the day’s end. Volume was well below the past 2 sessions with only spreads really standing out, suggesting most traders are maintaining their wait and see attitude. The spot N/U remained firm ahead of the approaching index roll, gaining 15 points to -1.55 while the rest of the curve saw pressure; U0/U1 weakened 35 points to -9.05. Robusta ended the day +$20 at 1179 settling back above the downtrend channel and posting its first higher high and low in 5 days.
Arabica fell through broad levels of support after failing to uncover motivated buying, settling 99.10, -340. This was the first time the active contract settled below $1 since the KCH contract did so during the index roll on February 7th. A few factors were at play with a weakening BRL, continued shy commercial buy side participation, an apparent increase in systematic selling, and some questionable reports around Brazilian consumption. This overcame a particularly weak DXY day and modest increase in risk appetite across assets. Sentiment has fallen to new lows anecdotally on the back of generalized fear of Brazil and CTA selling along with uncertain demand leading to the accompanying sense of inevitability of lower prices. Weakness was particularly notable in structure as spreads widened down the board, 10 points in the prompt NU and 75 months across N0/N1. It appears interest in the continued disappearance of certified stock has waned after a 8131 bag decrease noted yesterday and another 3952 today. London was unable to hold off the barrage even with an uptick of long side interest, closing 1177, -33. Spreads there were steady at unchanged in the front 2 periods, and $1 tighter carrying into 2021.
Coffee closed the day 105.10, +1.50 on the back of a macro influenced bid and ending a 4 day run of losses. The BRL gained ground from the start with political quiet after the video that had been the source of controversy regarding President Bolsonaro was released and proved not to be damaging. A general improvement in EM sentiment along with continued short covering was enough to overcome a 25 year low in foreign investment flows, deflation, and Brazil’s ascent to second place for the dubious distinction of most confirmed covid-19 cases (trailing the US). Risk was on down the board with economies kicking back into gear as developed nations are broadly moving into the terminal phase of virus growth for the time being and businesses reopen. The dollar weakened and BCOM components gained value in near-lockstep; only gold, silver and gasoil were down on the day at the time of KC’s close. Spreads suggested it wasn’t only macro however as NU posted a higher high, higher low, positive close for the first time since May 14th and N/N saw active volume trade as it lost a tick, settling 5 points below the actual low print for the day. London closed higher as well, gaining $12 to 1219. Structure was weaker there however, widening $2 and $1 respectively in the front 2 switches.
Arabica fell 90 points to 104.75, the lowest settlement for the active contract since March 17th. Pressure arrived as risk came off on the back of another increase in the governmental war of words over the coronavirus, with the DXY rising and commodities broadly slipping lower. KC and the BCOM were down nearly the same % and equities slipped as well. The BRL continued to gain ground, another 2% at the time of KC’s close, but was a nonfactor from 10am onwards. In comments yesterday BCB President Roberto Campos Neto suggested FX intervention was necessary last week as the BRL selloff brought it out of line with peer FX and fundamentals – reflecting on prior statements to regarding central bank perspective earlier in the year – which has driven recent short covering in the currency. Nonetheless with the BRL ignored and trading otherwise dull steady selling was noted in both the flat price and spreads; N/U weakened 15 points and N/N half a cent to -7.70 (also the lowest level since March 17th). Total volume was the largest since April 24th, spreads even longer (April 17th), and implied outrights were the largest since the 24th as well. The settle / VWAP spread was a fairly modest 44 points as most of the damage was done in real-time trading. London appears to be the beneficiary or arb buying, either explicit or implicit, standing strong again (relative to KC) at 1189 +3. Spreads in London weakened as well, albeit only modestly on a net basis, and were a point of as much conversation as traders could muster on the day. Robusta certs drew another 21 lots on the day.
Arabica fell 140 points, closing 105.65. Opening Brazil related pressure set the market off on the wrong foot and little fight was offered during early the European hours. A long slog higher kicked off about 90 minutes after the commencement of trading as light roaster buying found an absence of fresh offers. With the Dollar and commodity wind in the sales futures continued to gain steam, stepping modestly into positive territory (+60 points) a bit after the 8am traditional NY opening as the BRL found its footing following yesterday’s late selloff. However, 15 minutes later axed selling sent KC spiraling back towards its low, effectively ending the day. While prices recovered for a couple hours it wasn’t to be and the lows were traded going into settlement. With the FX and proxy markets offering upside motivation and thin volume the weakness was a bit odd, but again apathy seems to be the consensus sentiment amongst traders. Total volumes by all measures remain poor, and today only modestly improved upon yesterday’s woeful effort. With prices trapped, uncertainty related to covid discouraging risk taking, and no fresh news the trading is best considered consolidation. The VWAP for each of the past 7 trading days has been between 106.02 and 107.98 with total exchange volume peaking at 33,397 lots for any single day. Only once over that period has outright trading in the 2 most active contracts cracked 10k. Robusta fared better, closing $2 in the black at 1186. May open interest is finally cleaning up with 906 lots issued ahead of Friday’s last notice day.
Arabica settled down .70 points at 108.40 in a rather lifeless session. Early trade saw steady but feeble gains off the opening while also creating a .30 point open gap, basis KCc2 with KCK20 being off the board. The GAP had a limited lifespan and was filled shortly after the BRL opened and fell to the lows of the day along with KC. A brief correction was made as the FX made a positive recovery but at the end of the day it was close to a wash. Spreads continued to weaken with KC N/U losing another -.10 points and N/N another -.15. To put things in perspective we have been trading in a 4.20 range for the past 5 days and paltry 9.35 the past 15+. Robusta proved to be the more exciting of the two or a least volume wise and the complete opposite of yesterday, settling +$2 at 1196.
Certs increased by 2477 (1,793,953) with pendings down to 1250.
Arabica lost 10 points on the day, settling 97.30 basis September. The U 97.50 P entered the day with 2160 lots of OI, while the 97.50 C had 2429. Volume in each was light on the day and there would not be much surprise if there was abandonment or contra execution of either. From here we will refer to December as the OI rolled over last night. U/Z tightened a tick to -3.40 as the trend of Day 3 strength continues. Spreads accounted for 88.5% of total volume, slightly above the index roll timing average, while estimated outright trading fell below 10k lots for a 3rd consecutive session. ATM vol was pinned around 29 for the week ahead of option expiration, in itself an interesting data point with regards to the fairly quiet directional trading going on (1800+ Oct 107.50 C notwithstanding). Also interesting was the late session selloff in Robusta as prices fell $16 to 1296. As traditional lunch time struck NY, roughly 1350 lots of selling hit the market across U and X, sending futures $9 lower. Another dip showed up on the settlement period as intraday lows were posted and a lower high lower low was realized.
Arabica gained 50 points, 97.40, while posting a higher high, higher low after consecutive inside days. Day 2 of the index roll saw another tick higher in U/Z, reaching -3.35, yet ultimately settled a tick wider at -3.45 in a slightly abnormal second day weakening. Total spreads were light for a roll period, though the prompt U/Z was fairly good size at 21,708. It appears that a fair number of spreads were prepositioned, as yesterday’s OI drop of 8863 lots was larger than the implied outright volume indicating chunky structure plays were in place. 1560 U EFS were posted, along with 60 in H and 1500 in K, possibly signaling a roll of financed positions out 2 to 3 positions on the board. London gained $10 to settle 1312, even as Robusta traded a sub cent range again (1300 / 1318). U/X closed unchanged at -26 on 6015 lots.
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