Arabica coffee futures closed lower Monday as the weather prospects in Brazil improved. The most active contract for March delivery settled 125 points lower at 151.15 cents per pound. Volume reached 28,086 lots including 7,874 switches. The active switch March-May widened 5 points to end at -2.55 cents. The volume of switches has been below the average, due to a significant reduction of the open interest. As Oct 30, ahead of the Dec delivery period, the OI totaled 214,133 lots compared with 184,448 today. A more humid Brazil coffee belt is expected for the next 6-10 days. According to CROPCAST, an American based weather analyst, above normal rainfall is forecasted across most of the coffee areas, and will bring a notable relief to the coffee trees. Friday’s COT report showed commercials increasing their short position by 7,736 to 63,412 net shorts, while non-commercial increased their long position by 6,479 to 25,281 net longs. In other news, large US firms will report quarterly results this week that will help to reveal the state of the economy. The FOMC will publish on Wednesday a policy statement after the two-day meeting. Analyst do not expect a change in interest rates.
London Market- Commitment of Trader numbers were released this morning, revealing yet another build in the managed money position. Net long now just over 47,000 lots long basis the Disaggregated futures and options report. The increase in position coming from fresh longs in contrast to Arabica which has seen similar gains but on short-covering. In outright terms it was very much a game of two halves: early weakness attracting an element of short-term spec commitment before the scale down buying that has been in place around the mid-term moving averages for some days now retook control, leaving the board to work its way back to unchanged by day’s end. March 2400 Calls traded actively through the second half of the session as bargain hunters took advantage of the dip. Last trading day for the January contract tomorrow.
Arabica Coffee Futures ended slightly higher on Friday, settling 95 points higher at 152.40 cents per pound for the March-delivery contract. Prices began the session under pressure, breaking yesterday’s low. However, disappointing 4Q US GDP figures( +1.9% vs expected +2.1%) brought volatility to the currency markets, strengthening the Brazilian real and supporting coffee prices back into positive territory. The Brazilian real strengthened 1.18% at USDBRL3.13, levels not seen since October 2016. Short-term speculative buying pushed the market higher. Resistance below the 100 day-moving average halted the up move, prompting short term speculative liquidation. A congestion of moving averages and technical retracements kept March coffee futures trading in a 6.7 cent range during the week, as prices consolidated lower in overbought territory, affected by macroeconomic and technical factors. Participants now await weather developments in Brazil for the beginning of February. On the fundamental side, COMEXIN published their estimate for the 2017-18 Brazil crop at 49.4 million 60kg bags.
London Market- Strength in the Brazilian Real provided the foundations for London to move higher, aided by a void of origin pressure. Support remained active around the $2200 mark, attracting intra-day longs into the market although failed to gain sufficient traction to test the weekly high at $2262. Though lighter in volume than previous sessions, the March/May spread continued to hold firm around $13 discount, with participants awaiting Monday’s COT figures and will monitor the net position of the spec community closely. There were 13 tenders for the session and an additional 78 lots of Jan/March traded, but with overnight open interest in the delivery month standing at 802 lots, considerable interest carries over the weekend, with two trading days left.
KC posted an outside day low, only the fourth negative performance since the calendar turned. A midsession high of 156.95 was the peak (thus far) for the young year, yet the lack of meaningful extension through the KCH 50% retracement from the low was noted by several traders as a reason for lack of enthusiasm. With Robusta stumbling on the back of a hefty fund positioning and in front of this week’s commencement of Tet, Arabica found itself lacking fresh buyers. As recent conversation with respect to upside in KC seem to focus in many cases on the Robusta balance sheet, perhaps the 2nd consecutive lower session was an affirmative sell side indicator for some New York traders. With technical congestion, a fairly stable currency environment, and what many consider to be a fair price range in KC, one would expect buyers to emerge on relatively shallow dips, yet a considerable breakout to the upside could require fresh news or a motivated spec. Should London continue to abdicate some of its recent gains, one wonders if KC will track it lower, or if the two markets can separate in what many would consider a fundamentally illogical way for the short term.
Arabica coffee futures continued to advance on Friday on speculative buying encouraged by the technical picture. The most active contract for march delivery settled 245 points higher at 153.20 cents per pound. Volume was 23,403 lots including 3,725 switches. Activity in options was mostly on the March 155 and 160 calls. The technical outlook attracted speculative buying as the chart improved notably when prices exceeded the recent resistance at 151.60. Equity markets in general were quite nervous due to the Presidential Inauguration Day in United States. The dollar ended lower after trading unchanged for most of the session. The real and the Colombian peso, climbed to BRL3.1691 and COP2924.1. The COT report showed that non-commercials covered shorts and added some longs for a net long position of 22,163 + 8,598 as of Tuesday Jan 17. The short covering so far has been significant. Since Jan 02, the OI has declined 15,696 lots. During the week, Arabica prices gained 3.95 cents or 2.6%. The weather in Brazil remained to concern traders as less rainfall that forecasted has been observed. The Espiritu Santo, the main Robusta producer state continue under dry conditions.
London Market- London failed to generate further upside momentum to draw the week to a close, with a combination of origin pressure and arbitrage selling providing a lid on the market. With little action of note through the opening, attention turned to New York which continued to strengthen following a dynamic settlement last night. Having been absent for most of the week, origin selling returned in good volumes to stall upside traction after a temporary breach of the nearby high at $2266. Consistent selling was generated through the arbitrage, as traders bought New York and sold London as the March/March widened through 50 cents.
The options area attracted good turnover, with 1000 lots of the March 2300/2400 call spread traded at $30. An additional 500 lots of the Sep 2250/2400 call spread traded at $55 as participants look to build upside protection down the board. Tenders for the session were zero.
Arabica coffee futures closed higher on speculative buying. A constructive technical action encouraged the buying. The most active contract for March delivery gained 155 points to settle at 150.75 cents a pound, the highest level since Nov 30. Volume was moderate reaching 18,602 lots, including 1,943 switches. The active March-May switch ended -5 at -2.40 cents. The switch has been trading in a narrow range since November. In the options, more than 2000 March 135-130 puts spreads were traded. March options, calls and puts, exhibit a significant open interest than can act as natural boundaries for the market action. In related news, Brazil confirms that the CONAB’s report showing Conilon stocks of 2.2 million bags will represent a deficit close to 1.0 million bags by the next harvest. The government approved the sale of 43,200 tons of coffee from the public inventory. From Colombia, R Velez, head of the coffee federation, said that output will reach 14.5 million bags this year, the highest in 24 years. Farmers have been focused on productivity to increase yields, he added to Reuters. The dollar was firm supported by economic data released today. The dollar index advanced 0.5%.
London Market- London maintained its recent upward trajectory, driving above what was the short term upside target at $2259 en route. Prices lifted off the opening bell, adjusting to a final hour rally in New York yesterday evening. Strength in the Brazilian Real saw additional support enter the market, although values failed to move aggressively higher with the ‘C’ contract operating a holding pattern. Nearby spreads provided much of the volume for the session, with the March/May the most active, strengthening into $2 premium.
Options activity simmered, with 500 lots of the July 2250/2400 call spread traded at $54 alongside a 14% delta at $2258. There were 0 tenders in London today.
The Robusta market traded higher for 6 out of the past 7 days, to fresh 4 year highs, as funds continue to pile on longs while dryness persists in Brazil’s conillon region. Forecasts predict minimal rainfall over the next 7 days in Central and northern Espirito Santo, eastern Bahia and northeastern Minas. The London COT report released today tells us that the managed money long position grew by 4,799 lots over the Jan 4-10 reporting week. New York traded higher in sympathy with a firmer London, weaker dollar and firmer real. Activity was largely spec related as prices have flirted with and consolidated around the 1.50 level for the past four days, settling today just 10 points shy. Conab released its first 2017 crop estimate which was greeted with the usual skepticism and taken in stride, calling for a crop of 43.7 to 47.5 mm bag crop comprised of 35-37.9 Arabica and 8.64 to 9.63 mm bags of conillons. For now the story is in London, while New York stands patient, taking its intraday cues from fluctuations in the real.
Arabica coffee futures for March delivery settled 30 points lower at 149.30 cents a pound on spec book squaring ahead of the long weekend. The market will be closed on Monday in observance of the Martin Luther King Jr Holiday. Volume reached 30,802 lots including 7,287 switches. Prices were under pressure after the opening on producers selling. According with SOMAR good rains are expected for the main Arabica growing areas of Brazil for the next 3 to 5 days. Espiritu Santo, the main Robusta producer state will receive some rainfall also. During the week, Arabica prices climbed 6.40 cents. The move can be attributed to spec short-covering, evidenced by the dwindling in open interest. The OI declined 9,173lots during the same period. The real was firm during the week, following economic news in Brazil, but gave back the gains at the end to finish with little change at USDBRL3.2230. The COT report published after the close showed the non-commercial sector adding 2060 longs and covering 3873 shorts, for a net long position of 11,037 lots.
London Market- Robusta observed a holding pattern for much of the day, closing what has been rather an active week on a more subdued note. Values were little changed off the opening, with origin pressure all but absent and a lack of buy orders evident overnight. Weakness in the Brazilian Real following yesterday evening’s close continued into today’s session, causing London to track New York marginally lower throughout, although this was observed by many as corrective action. Nearby spreads remained the main driver of volume with reasonable turnover derived from both the March/May and the March/July structure.
The options arena maintained its strong recent activity, with 3000 lots of the July2400 call traded at $85 alongside a 36% delta at $2205. An additional 1500 lots of the March 2400 calls traded at $16 and the market will monitor the open position surrounding these strikes.
World faces third successive coffee output deficit, says ICO
By Mike Verdin - Published 12/01/2017
The world faces a third successive coffee production deficit, despite the consumption estimate facing an, unusual, decline, the International Coffee Organization said, in a report viewed as bolstering market sentiment.
The ICO, in its first forecasts for global coffee supply and demand in 2016-17, on an October-to-September basis, pegged production at 151.6m bags, up less than 200,000 bags year on year.
While arabica output is forecasting hitting a record 93.5m bags, buoyed by strong results in Brazil and Colombia, the top two producing countries, robusta volumes were seen falling 6.0% to a four-year low of 58.2m bags.
In Vietnam, the top robusta growing country, the ICO said that "prospects for 2016-17 are less positive, with drought at the beginning of calendar year 2016 likely affecting output," seen falling 11.3% to 25.5m bags.
Drought in Brazil's robusta-growing areas has also left the country with "negligible export availability" of the variety, while output from Indonesia, another major robusta producer, was seen tumbling 18.8% at 10m bags.
"Furthermore, the vibrant domestic consumption market will reduce export availability," the ICO said.
In stocks, or pots?
Still, the organisation revealed a drop in its consumption number for 2016-17 too, by 600,000 bags – a rare occurrence in a market in which world demand is typically seen rising by some 2-2.5% a year.
However, the ICO urged caution over translating this trend into actual coffee drinking, saying that strength in its estimate for 2015-16, which was hiked by 4.4m bags to 155.7m bags, may reflect increased inventories.
"It is possible that some of this change can be attributed to increases in pipeline stocks which are not officially recorded, rather than actual consumption," the ICO said.
"Consumption in 2016-17 may show a statistical decrease as these stocks are absorbed into the market, despite overall growth in the market."
'Sufficient consumer stocks'
The comments tally with an observation earlier this week from veteran analysts Judith Ganes Chase of "sufficient stocks [of coffee] in consumer hands" an idea supported by strong coffee export data.
"For a market that had rallied up previously on tight supplies, I still don't see this," Ms Ganes Chase said.
"Export data from the ICO points to large shipments and likely destocking by producers to take advantage of the better prices."
The ICO said that data from the first two months of 2016-17 showed exports are "already 1.5m bags higher than last year, on 19.5m bags, with total exports over the last 12 months reaching 117.6m bags".
The ICO also highlighted the support given to robusta coffee prices, compared with arabica values, from the relative production fortunes of the two varieties, saying that "prices on the futures markets have reflected these developments.
"The possibility of a record crop in Brazil in 2016-17 put downward pressure on arabica prices. Robusta prices, on the other hand, strengthened as heavy rains in Vietnam disrupted supply."
The premium of arabica futures over robusta ones – the so-called arabusta spread – "narrowed considerably, reaching a 35-month low of 42.58 cents a pound on December 28".
'Longer-term coffee price buoyancy'
The spread has since widened as arabica prices have made a strong start to 2017, soaring by 9% so far, amid buying attributed in part to index funds, undertaking their annual portfolio reweighting process, but also by roasters, who have switched some demand to arabica beans.
Roasters "have considered robusta coffees to be an opportunist discount component, within their mostly arabica coffee blends", I&M Smith said.
The trading house also flagged the potential for the ICO report, in showing a third successive production deficit in 2016-17, to offer some support to prices.
"There is no doubt that the ICO figures - along with some concerns over the prospects for unquestionable deficit in robusta coffee supply for the present coffee year with the added longer term concerns over the prospects for the new 2017 Brazil crop - shall assist to limit the downside potential for the coffee terminal markets."
Wednesday's announcement by JM Smucker of 6% increases to prices of coffee brands such as Folgers and Dunkin' Donuts also "indicates respected industry belief in the potential for longer-term coffee price buoyancy, which would assist to inspire some degree of positive market confidence".
Agrimoney.com - http://www.agrimoney.com/news/news.php?id=10332
ORRVILLE, Ohio, Jan. 11, 2017 /PRNewswire/ -- The J. M. Smucker Company (NYSE: SJM) announced today an increase in the list price for the majority of its packaged coffee products sold in the United States, primarily consisting of items sold under the Folgers®, Dunkin' Donuts®, and Café Bustelo® brand names. Prices increased an average of six percent on impacted items in response to sustained increases in green coffee costs. The Company's K-Cup® pods were excluded from the price increase.
Dunkin' Donuts® brand is licensed to The J. M. Smucker Company for packaged coffee products sold in retail channels such as grocery stores, mass merchandisers, club stores, and drug stores. This information does not pertain to Dunkin' Donuts® coffee or other products for sale in Dunkin' Donuts®restaurants.
About The J. M. Smucker Company
For nearly 120 years, The J. M. Smucker Company has been committed to offering consumers quality products that bring families together to share memorable meals and moments. Today, Smucker is a leading marketer and manufacturer of consumer food and beverage products and pet food and pet snacks in North America. In consumer foods and beverages, its brands includeSmucker's®, Folgers®, Jif®, Dunkin' Donuts®, Crisco®, Pillsbury®, R.W. Knudsen Family®, Hungry Jack®, Café Bustelo®, Martha White®, truRoots®, Sahale Snacks®, Robin Hood®, and Bick's®. In pet food and pet snacks, its brands include Meow Mix®, Milk-Bone®, Kibbles 'n Bits®, Natural Balance®, and 9Lives®. The Company remains rooted in the Basic Beliefs of Quality, People, Ethics, Growth, andIndependence established by its founder and namesake more than a century ago. For more information about the Company, visit jmsmucker.com.
The J. M. Smucker Company is the owner of all trademarks referenced herein, except for the following, which are used under license: Pillsbury® is a trademark of The Pillsbury Company, LLC and Dunkin' Donuts® is a registered trademark of DD IP Holder, LLC. K-Cup® is a trademark of Keurig Green Mountain, Inc., used with permission.
Arabica coffee futures finished higher Monday, helped by the currencies. The most active contract for March delivery settled 135 points higher at 144.20 cents a pound. The activity began to improve as traders are returning from the end of the year break. Volume reached 34,311 lots, including 8,081 switches. The active Mar-May switch widened 5 points to end at -2.35 cents. The dollar declined 0.2 % as traders took profit. The real remained firm, trading at USDBRL3.1947, up 300 points during the session. Concerns about the dry weather in Espiritu Santo continued as some coffee growers resumed irrigation. According to Cooabriel , a coop in Espiritu Santo, the drought already had affected the region for the past 20 days. Espiritu Santo is the main Robusta producing state in Brazil.
London Market- Overnight dollar strength saw values fall lower off the opening bell, albeit in low volumes, with origin pressure all but absent. With little action occurring in London, participants turned to the movements of the ‘C’ contract for direction, as values bounced higher due to strength in the Brazilian Real. Intra-day longs arrived in London to move values positive for the day, though upward momentum remained limited by arbitrage traders selling London as the H/H widened to 47.5 cents. Last week’s high at $2167 remains the key short term target for moves higher. Much of the days turnover was generated through the Mar/May switch with over 2500 lots traded, while March book management saw 2000 lots of EFP’s posted.
This week’s COT figures, based on the disaggregated futures and options sector showed a 2,413 lot increase to the managed money net long which now stands at 34,372 lots long. The merchants added an additional 4,591 lots to their net short position which reads at 34,690 lots short, predominantly achieved through 5,050 fresh short positions. Tenders for January’s delivery month still remain at 0.
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