Arabica closed 102.10, -50, giving away an early opportunity to gain some ground. It would be fair to say action was dull, posting another small 140 point range, with volumes never exceeding 205 lots in a minute’s time (basis active KCH). Options continue to be the preferred avenue for expressing a grudge with the price, led by 1300+ K 100 Puts. It would appear some of the risk premium entered over the prior week has slipped back out as implied volatility continues to soften; generic 50d fell from 34.25 on Friday to 29.7 on today’s settlement. Robusta settled 1527, -10 two ticks off the low. There probably isn’t much to say about a market that trades in a 11mt intraday range while settling in the middle of the dreary 1 month range. A modicum of excitement was posted in options where paper sold 1850 K 1700 C, and the H 1550 strike remains a focus in both the call and put.
Arabica neatly paralleled the BRL for the entirety of the active trading day, tracking eclipsing Tuesday’s high and settling 105.30 +190 with a final print a tick off the high of 106.10. MOC buying finally broke FX correlation, sending KC prices higher while reversing course. As have been the case since the change in settlement time, the final hour of NY trading was spent in a fairly narrow band. Intraday GFS models reinforcing dry outlooks helped place a floor into dips, and drove fresh buying in the quiet period. Robusta settled +25 at 1548 as volume continues to lack. Options were again active, with the K 1700 C leading the pack 1275x
Arabica eked out a single tick gain, settling 103.40 in a choppy 170 point range. Early hours risk-on did little to boost KC, and with a softs basket sell off around 8:15am, coffee seemed poised for a painful spill. However, it wasn’t to be and fund buying into weakness boosted prices to theretofore intraday highs. Ultimately, price went up, down, up, down, up, down, up before deciding to do nothing, with the commitment to a direction as in doubt as the next month’s rainfall. Robusta charted a similar path – unsurprising given the heavy correlation – yet ultimately closed $7 higher at 1523. Volume continues soft in the London arena, yet continued paper call bidding drove 1250 lots of H 1600 Calls at 10.
Arabica fell 160 points to settle 103.35, trending irretrievably lower essentially from the time New Yorkers arrived at their desks. Earlymorning positive returns were in opposition to the bulk of other commodities as cynicism around US x China trade developmentspunished risk assets. Continued hot & dry weather were a positive counterbalance, yet ultimately was not enough to keep KC in the black. The BRL was a noted driver of price again, and a poor FX reception to comments from President Bolsonaro conspired to drag coffee lower. London has been trading a historically above average correlation to KC for the last 6 months (.9 R^2), so it came as little surprise that prices fell $22 to settle 1516 after losing $6 during yesterday’s solo performance. Noted size offers were regularly shown during both trading days, suggesting someone is doing their best to keep prices capped.
Arabica settled unchanged at 102.40 in one of the choppier days of recent trading. A higher high and higher low was posted, yet a mere 175 point range emerged and KC spent the entirety of the day pinballing from side to side. Short pressure continues to emanate from the spec community, exacerbated early by an hour long early morning weakening in the BRL (3.7280 to 3.7725 before most had settled into NYC desks), while commercial value seekers continue to build a wall of support into the lows. Spreads were fairly firm on a recent history basis, HK again trading into -3.05, though the spot structure settled unchanged a tick off the low (-3.15). Stubbornly deep contango remains a worry to some who otherwise may be more enthusiastic buyers, having been burned in efforts to apply logic to the carry into new lows time and again. London was typically dull, settling down $4 at 1535 in an $11 range. Some arb activity (long our side of the pond) is afoot at current levels, but the dreadful inaction from roughly 930am til MOC selling arrived suggested that more than anything disinterest rules the day.
The week started with KC settling at 102.75 down 110 points, on the last day of the traditional rebalance, and third Monday without COT data to chomp on due to the government shutdown.. A 2 cent inside range and a 3rd lower high/low provided little fresh inspiration, as prices fell to the middle of a well tread upon 7 cent range. Mar/May faltered as a matter of course, as outright pressure remains biased to the front month, while the spread value naturally widened to 350 under from Friday’s -3.35 settlement. London relinquished $15 to settle at 1528, its lowest close thus far this year.
KC chalked up a 3rd day of gains settling at 108.50, plus 40 points, as it parlayed a string of higher lows for each session thus far in 2019, along with higher high’s in 5 out of the year’s 6 trading days. Open interest increased for an 8th day running today to the tune of 1,889 lots as the first day of the traditional index fund rebalance saw anticipated inflows. Industry and short term specs again were noted adding to the long side amidst some weather uncertainties and the Brazilian currency trading at its firmest level since the day following Bolsonaro’s election. London failed to keep pace with N.Y. as it settled down $21 at 1535 while posting a 1559 triple top. Beginning of the year flows, a lack of COT data and N.Y. trading 10 cents above 12 year lows, muddle already murky waters in a market where the funds remain short but its share of skepticism does not.
Arabica gained 115 points to settle 102.75 in quieter than expected trading. Index allocations are locked in basis settle today, with expected net buying in KC of somewhere +/- 5k lots over the coming 5 days. This appears to have excited no one, as coffee has managed to ignore the imminent buying up until the brink, as well as a mid-session CL/SB rally, the BRL strengthening from 394 to 370 from Dec 26th through today’s morning trading, and a developing (if admittedly low probability) dryness story to lose 125 points since Christmas – or gain a whopping 75 YTD depending on which arbitrary recent holiday calendar measure one prefers. Stranger still, KCH traded in a 35 point range for the final 2+ hours of the day, spanning the fresh early settlement period. Initial thoughts were that the machines hadn’t been recalibrated, but the innocuous action at the historic 1:23-1:25 window suggested disinterest was more at issue. Robusta fell $3 to 1542, missing Friday’s high by $2. Volume was thin and structure roughly unchanged (HK -18s, $1 weaker, KN -15s, $1 stronger).
KC reversed yesterday’s losses chalking up a 260 point gain to settle at 102.15 basis March, saving face by closing at the top of the commodity index following yesterday’s close at the bottom. Coffee prices found inspiration in what appears to be a honeymoon rally for Bolsonaro in the Brazilian currency, as the real traded to a 7 week high. The intraday rhythm in KC mirrored that of the BRL as traders blew off yesterday’s disconnect as an aberration due to first trading day of the year paper flows. While N.Y> remains within the 98.60-104.00 trading range, London broke out to a 4 week high, accreting $26 to settle at 1526 MT and was accompanied by a 6th session of higher lows
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