Arabica coffee futures ended lower Tuesday on spec sales. The selling came when the market failed after posting a new 12-day high. The most active contract for May delivery lost 50 points to close at 144.75 cents. Volume remain moderate at 21,792 lots, including 3,901 switches. The active May-July switch continued trading inside a small range between -235 and -2.30 cents. The recent lack of direction of the market is failing to attract participants, as evidenced by the open interest that in the lowest level of the last three years. Recent data also shows that the non-commercial position net long position declined 3,291 lots as of last Tuesday to 10,985 lots. In macroeconomic factors, the dollar, and the stock market declined on concerns that the promises of the new government will become a political match and could trigger a correction of the markets. Crude oil declined $0.75 to $48.16 per barrel.
A failure to generate upside traction above $2200 and a buildup of origin selling around these levels provided the platform for values to move aggressively lower towards the end of the session.
Prices in London edged up through the early parts of the day in response to overnight Dollar weakness although remained limited by the arbitrage with the May/May operating around 45.5 cents. A temporary breach above $2200 failed to generate additional short term long positions entering the market, with values proceeding to fall through a combination of weakness in New York and light clips of resting origin selling adjusting down to market level. Values observed a holding pattern through much of the afternoon before early longs looked to liquidate, triggering technical selling stops at the 20 day moving average at $2169 en route. Nearby structure weakened in response to the move lower, with the May/July moving into $20 discount through 2100 lots and into the hands of the commercial short.
There were 21 tenders for the March delivery month, the first in over a week, with overnight open interest for the month having held at 164 lots for the last five sessions.
May delivery Coffee futures in the ICE Exchange settled 60 points higher on Friday at 142.05 cents per pound. Volume reached a mere 16,357 lots. After gapping up at the opening for the second consecutive session, prices consolidated sideways, influenced by short term speculators trading both side of the market. Markets overall were relatively calm, with little change in major currencies. The Brazilian real strengthened 0,55% at USDBRL3.10.
During the week, prices consolidated sideways, in low volume, increasing 70 points. Volatility in the Brazilian real influenced prices after the FED decision was published to increase interest rates and the federal funds target by 25 points. GCA inventories in the United States for the month of February were published, increasing 123,007 bags to 6,445,774 bags. Last year inventories increased by 33,000 bags during the same month.
The Robusta market closed the week in turgid fashion, once again struggling to generate momentum in either direction, caught in an apparent $2150/$2200 range. Flat price action saw values lift once more off the opening bell in response to overnight Dollar weakness, although further long positions failed to establish to lift London through $2200. With New York also struggling to generated upside traction, early long positions looked to liquidate, with London moving into negative territory where it held for much of the rest of the session. Technical support emerged at the 20 day moving average at $2169 with values content to operate between there and the 50 day average at $2189. The posting of 4300 lots of EFPs against May17 provided much of the day’s volume, with most participants assigning this to the financing of the certified stock holder. Reasonable turnover was observed in the options area with 1600 lots of the Sep 1800 put trading at $12 alongside an 8% delta hedge at $2215.
The ICE coffee futures closed higher on Wednesday; May delivery contract closed 55 points higher at 141.45 cents per pound. After the FED deciding to raise interest rates and the federal funds rate target by 25 points, the Brazilian real strengthened by over 2% after the coffee market closed. This prompted buying at market open, reflecting a positive gap of 120 points at the opening. The upward momentum took the prices near resistance level at 144.20, where the 20-day moving average is and the Fibonacci technical delay of 38.2% (since the beginning of the year). Lack of follow through caused the short term long positions to be reversed, erasing the daily high and partially filling up the opening gap. The Brazilian real experienced volatility this session, trading between 3.09 and 3.11, influenced by the activity of the coffee market. In weather news, the coffee belt in Colombia will have rains in Medellin, Armenia, and Manizales, helping the main crop.
An air of bullish sentiment was apparent through the early part of the morning in response to overnight Dollar weakness following yesterday’s Fed meeting. Prices lifted $15 off the opening bell, albeit through relatively light volumes, with short term spec buying returning into a void of resting selling orders. Small clips of origin selling became visible as London moved above the 50 day average at $2189 and towards the psychological $2200 barrier, with New York also pushing higher. Additional upside momentum failed to establish following a brief break above $2200 with London proceeding to mirror the action of the ‘C’ contract, as early spec longs scrambled for cover. The May/July switch remained active, trading 1000 lots and weakening into the hands of the commercial short at $20 discount. Outright values ticked lower for much of the rest of the session, covering the opening gap en route to closing broadly unchanged.
The ides of March left little to “beware” of, as KC traded all of a 180 point range, whilst London fell short of a cent trading in a $19 range. Blame it on the fed for lack of any other excuse as markets in general were quiet ahead of the 2:00 p.m. FOMC rate decision. U.S. equities traded slightly higher while crude oil bounced from a November low, treasuries advanced and the dollar weakened slightly ahead of the much anticipated rate increase. Volume in Arabica at 12,135 and Robusta at 5,699 lots had the dubious distinction of being the lowest volume trading sessions of the year. Prices stay within the mid and lower Bollinger bands for the past 10 trading sessions in a 790 point range. Volatility naturally is under pressure, as traders wait with bated breath for something that’s got to give.
The fed raised rates by 25 basis points as was well expected and continued to project 2 more rate hikes this year adding that “near term risks to the economic outlook appear roughly balanced.”
Arabica coffee futures finished higher Friday helped by the currencies. The most active contract for May delivery gained 90 points to close at 141.35 cents a pound. Volume reached 23,180 lots, including 5,287 switches. Today, the market action appeared to be more influenced by macroeconomic factors, since new estimates of the Brazil crop did not cause a major effect. Prices were under pressure early, but bounced as the BRL recovered 1.5 % to USDBRL3.1447. The dollar edged lower after the US jobs report was published. The US currency declined 0.5%. The move was attributed to profit-taking, according to analysts, the jobs report makes the argument stronger for the FED to raise interest rates. The Fed will meet March 14-15 and a decision is expected. Next week GCA stocks report will be a good indication of the US S&D balance, after Brazil’s exports fell in February to 2.5 million, as reported by CECAFE. In February, US green stocks usually decrease 22,182 bags on average for the past five years.
London closed the week in a similar fashion to much of the previous few sessions as both volume and volatility remained scarce. Values were broadly unchanged off the opening, a theme which continued throughout much of the morning, with most participants awaiting U.S non-farm payroll data after lunch. Prices failed to generate sufficient upside traction to draw significant levels of origin selling back into the market, with many assigning the May/May arbitrage as a lid to the market with values content to hold around 42 cents. Strength in the Brazilian Real pushed New York higher through the remainder of the afternoon, resulting in London operating in negative territory via the arbitrage, although the 20 day moving average at $2164 remained supportive, which will act as the short term downside target heading into next week. A further 1436 lots were added to the overnight open interest which much of the change a reflection of the September put spreads which were traded yesterday.
Arabica coffee futures bounced from the support area to settled higher Wednesday on speculative short covering. The most active contract for May delivery gained 105 points to 141.75. Volume reached 28,444 lots, including 4,877 switches. The active nearby switch ended a -2.35 cents. Coffee prices were under pressure early during the session due to a weak Brazilian real. The real lost 1.5 % to USDBRL3.1661. The industrial output declined 0.1% during January, indicating that the economic recovery will be slow. In Jan 2016, the industrial output was up 1.4%. A sharp drop in crude oil and a firm dollar influenced all commodity markets. Crude oil fell 5.0% to $50.90 per barrel.
Friday is the expiration of the April options. The largest open interests suggest some support could be at 140 and resistance at 145.
Much of London’s volume was generated via the posting of a 3132 lot EFP in May and a further 3542 lots posted in November which most participants have assigned to forward finance rolling.
Outright volume remained subdued as London observed a holding pattern for much of the session with both origin selling and industry buying all but absent. The May/July switch continued to turnover reasonable volume, holding around $20 discount through 1300 lots with further volumes showing in the July/Sep switch. Afternoon strength in the ‘C’ contract saw London move into positive territory for the remainder of the session, which held going into the close, although further momentum is required in order to draw participants back into the market.
Arabica coffee futures traded lower throughout the session, with the May delivery contract falling 105 points at 143.30 cents per pound. Activity was rather slow, as prices slowly edged lower. Technical weakness in yesterday’s activity prompted selling. Volume reached 25,831 lots, including 4,037 switches. During the week, coffee prices experienced significant volatility. The may-delivery contract fell 3.05 cents, or 2%. After beginning the week by losing 515 points on Monday, prices found strong support below the 140.00 level, which helped push prices up to the 20-day moving average. Lack of follow-through in the movement and technical weakness pressured prices, towards the end of the week. Brazil was partially active during the week, out for Carnaval during Monday, Tuesday, and half of Wednesday. In related news, the ICO published global export figures for the month of January at 9.84 million bags, 6.7% higher than in January of 2016. Technical support is now noted at 140.00 and 135.20, while resistance can be found in 146.90 and 152.30 for the May-delivery contract.
London operated a $16 range through the session, with values content to hold around the $2200 for much of the day.
Prices immediately opened $15 lower off the opening bell, adjusting to final hour weakness in New York yesterday evening and accentuated by a lack of resting buy orders following the yesterday’s aggressive move higher. Reasonable clips of Asian origin selling were present through much of the duration of the day, maintaining a lid on the market as upward momentum failed to establish. With the ‘C’ contact unfolding in a sideways motion, London held a narrow range for the duration of the session.
Decent volume was generated via the options area, as participants sought additional upside cover. The May 2200 call traded 500 lots alongside a 50% delta at $2200 while 400 lots of July 2250 calls were traded with a 48% delta at $2210.
Arabica ignored the ascendancy of Robusta on the open, falling 75 points in the first two minutes on spec selling. However it quickly rallied back inline and spent the European hours tracking its sister market. The arrival of Americas based traders led to a pickup in volume just as industry buyers sloughed off coincident to the European lunch hours. Volume picked up around 8am EST as it typically does, yet added little in terms of volatility. It is subject to debate as to whether KC found its lows on the apparent new shorts reflected in OI, lack of trend strength to encourage momentum traders to continue attacking the low end of the range, or spillover commodity sentiment that directly impacted grains as Presidential regulatory advisor Carl Icahn reportedly presented a deal to overhaul the Renewable Fuel Standard. Brazil will return to trading tomorrow, which seems more likely to impact the coffee market through BRL based correlative trades rather than origin pressure. Notices go out in Robusta tonight, and while nearly 12,000 H AA’s match up well against the 13,455 OI in the contract, 6180 lots of volume (5883 H based spreads) traded during the day. With structure reaching out to -40, with a weighted average price of -37, at least a few traders still hold out hopes for intrigue inducing deliveries. World coffee exports for January 2017 came in at 9.84 million bags.
Arabica Coffee futures for May delivery fell 3.52% on Monday, following Fridays tumble. Prices began the session lower, losing 1.25 cents within the first hour of trading. With limited volume, prices consolidated near the lows, hit lower by consecutive waves of selling, breaking nearby support of 144.00 basis May. Volume reached 31,255 lots, including 4,488 switches. Open interest increased 1,812 lots, suggesting additional shorts entering the market during. Spread activity was noted in the options realm, specifically in the 145, 155, and 165 strike range. Some traders sold anticipating Brazilian selling coming after Carnival. The soft commodity complex saw losses, adding to the bearish sentiment, with sugar losing 3.33 percent and cocoa losing 0.6%.
London maintained its recent downward trajectory amid weakness in the nearby structure, as front month management gathered pace ahead of Wednesday’s first notice day. The March/May spread operated under immediate pressure throughout much of the morning, a theme which continued through the session as values weakened to $37 discount trading 6000 lots. Flat prices moved aggressively lower in response, firstly driving through the 2017 low at $2116 before breaching the psychological $2100 barrier. Around these levels, roaster buying emerged in good volumes, halting the negative price action in London despite the ‘C’ contract continuing to unfold lower. For much of the rest of the session, values held around $2100 with industry buyers content to soak up the pressure. Additional support emerged through the May/May arbitrage as values narrowed under 47 cents. Further good volumes were generated via the options market, with heavy participation in the Sep 2500/1900 fence the main feature. A further 500 lots of the May 2100/2000 put spread traded at $44 as participants sought additional downside cover.
Downright lethargic trading on both sides of the pond with London trading a $20 inside session and New York lacking the momentum to trade a 5th day of higher high’s. New York traded its lowest volume of the year, as traders struggle to find a reason to believe in a midrange market, while consensus appears divided over whether the next 5 cent move is higher or lower. The most logical catalysts for the discretionary trader to take action go wanting, as uncertainty and confusion swirls about the Robusta re-importation saga, precipitation is slated to return to Brazil’s coffee belt and the real holds steady in a firmer range. Technically New York flirts with the 15315, 100 day moving average, and while the MACD crossed positive 2 days ago, it has failed to attract upside momentum. For those interested in statistics a footnote…. the 2 year average gross commercial long position is 82,673 lots vs. last week’s position of 60,581 lots. The gross commercial short 2 year average is 117,862 vs last week’s position of 116,930 lots while the 4 year averages are 69,116 and 112,443 lots respectively. Here’s hoping for a break from the tedium!