Arabica rallied 125 points to close 124.50, lifted by an FX tailwind for the bulk of the day. Prices continue to trade around bunched moving averages, with plenty of stories on both sides of the argument yet with more known unknowns than new catalysts. The COPOM (open market committee of the Brazilian Central Bank) minutes were released early in trading highlighting that “the fiscal concerns create an upside risk for inflation expectations”, which could trigger an earlier than expected hiking cycle (quote from minutes, balance of italicized from Morgan Stanley Research). This drove the BRL for the day, aided by a weaker DXY as well, and KC matched the pattern nearly tick for tick, with noted outperformance and then reversion to the trend at 10am and noon. That noon spike to intraday highs would prove to be an inflection point, with the selling snowballing from there and KC departing from the FX trade. Conspiracists amongst the market could be forgiven for their perception that an axed seller was driven to subdue the close, and coincidentally enough the roughly 20 minutes of continuous pressure from 12 onwards was alleviated immediately after the settlement window, with little volatility noted in the final hour. Volumes on the day were similar to the past few sessions with interest declining from the early year fever pitch as heavier spread volumes made up for some of the lightest outright trading YTD. Nonetheless structure was little changed, 5 points tighter in both HK and HH. London gained $8 to close 1317 with HK tightening another tick to -8.
Coffee rallied 125 points, closing 126.45 while recovering most of yesterday’s losses. For a second day a wave of selling emerged to interrupt otherwise quiet trading, though today’s effort was both smaller in size and lesser in impact. After a steady climb higher in the overseas hours futures maxed out for a second time at 8:30am, forming a rough intraday triple top following 7am and 8am pushes to 127.30/127.25/and finally 127.30 again. Short term specs took this as a sell signal and prices chopped their way lower for the following 2 hours before finding support just around the YTD VWAP (124.55). KC ignored a weakening in the BRL en route to a rebound over the final 3 hours of trading and a final print of 126.70. Both futures and spreads (-2.05 HK, -9.50 HH) remain largely in the recent range. Certs rose 14,205 bags to 1,571,125, on a 75.6% pass rate. Robusta wasn’t able to keep pace, falling $17 to 1323 and spreads losing $2 each in the front 2 spreads (H/K -12, K/N -15).
Arabica fell 195 points to 125.20, wiping out a midday meltdown and settling with the VWAP and the bulk of early North American trading prices. Volumes were the lowest of the year, even with the aid of frenzied trading as prices plunged from 125.15 to a 123.40 low before digging out of the hole en route to the mentioned settle. It was an opportunity wasted for the bulls as the BRL outperformed, trading around 1% stronger as KC plummeted. Market also posted its second lower close since last Friday and traded back through the 9 day MA and Mid Bollinger band on the aforementioned selling before settling back above both. Certs witnessed another increase of 14,795 bags (Brazils) while pendings dropped to 102,143. Robusta fell victim to another day of thin volume, settling at 1340, down $8 with H/K remaining unchanged at -10.
Arabica shook off early weakness en route to a 210 point gain, settling 127.35. Price followed the FX for the bulk of the day and familiar commodities moved largely in unison from 9am onwards as tailwinds were many. The BRL gained 2%, the DXY weakened, and commodities were up across the board with few exceptions; every ag printed higher, led by sugar at +5.24%, and KC would not be left behind as early shorts were forced to cover. A potential trucker strike in Brazil on Feb 1 seemed to drive little concern, probably appropriate for as devastating as 2018’s was to Brazil the impact on coffee was short lived and only generated 8c of bottom to top gains, followed by an immediate retreat. Jobless claims far exceeded expectations yet consensus that the worst has likely passed; optimism around a larger relief package in the pipeline to pass the recently passed measure paired with comments from Fed Chair Powell that “now is not the time” to discuss and exit from their easy monetary policy regime. In options upside was bid for a second day, yet spreads refused to come along for the ride; HK weakened a tick while KN and HH both gained 5 points. Certs returned to their familiar ways, increasing 12,423 bags on a gross inflow of 13,900 Brazils which passed at 98% rate. 125,275 bags remain pending. London refused to follow recording an unch session at 1332. Spreads were slightly bid, up a dollar each in HK and KN, with some structure buying likely generated by paper buying 2000 K/H 0 Call CSO.
Arabica fell 225 points on day 2 of the index rebalance settling 121.45. Prices dipped as low 118.75 intraday on the spot March contract, yet held on a continuation basis after narrowly breaking through the 38.2% retracement of the recent Nov 2nd low through January 4th high. Macro pressure was apparent all along as coffee, already lacking in motivated buyers, fell hard on a morning of weakness across risk markets. Commodities were uniformly lower with precious few exceptions, equities probed a three day low, the dollar rallied notably, the BRL weakened roughly 1.5%, and Bitcoin, a resurgent risk measure, plummeted 20% at its low at least in part due to dollar strength per financial media reports. As the extremes of that early trading pattern eased KC climbed off the floor, taking a cue from a turn in the DXY shortly beforehand. Commodities remained weak, as did other markets, yet the lows were in for most markets around 10am. Discretionary buying interest – both spec and commercial – was noted into the lows as value seeking picked up. Outright volumes were above the 10 day average though well below Wednesday’s highwater mark, while the total volumes continue to be impressive, today aided by 17,567 spreads, the largest since December 10th. Both the spot HK (-2.10, -.05) and annual HH (-9.65, -.20) saw fresh selling and K outright volumes continue to increase. London posted a doji pattern, closing a mere $1 (1315, -3) below the opening 1316 price after falling to its lowest level (2nd month continuation) since Oct 22 intraday at 1296. Spread volumes, 13,637 total, were heavy and notably featured size down the curve; 4089 N/X were only narrowly eclipsed by 4236 H/K. Nonetheless both the HK and HH were settled unchanged.
Arabica staggered to a positive close, settling 20 points higher at 121.10 for the first time in 2021. Futures were strong for the early session before FX began dragging prices lower and discretionary traders largely stood aside looking for better entry. With that said the market posted its 3rd consecutive lower high and low and it’s second day settling below the Mid Bollinger for the first time since early November. The real eye catcher however was the heavy selling post settle; nearly 700 lots flooded in as prices spiked lower at 1:14pm, and the final print was 119.60, just above the 119.35 low recorded on that sell down. That selloff was far and away the heaviest volume of the day. The index roll / rebalance will kick off tomorrow with reference levels set today. London lost $20 to close 1336 on the day, dragged lower on what appeared to be arbitrage selling.
Arabica fell 105 points to settle 125.10, a second straight negative close to start the year. Prices were stable through the early session and ticked up ahead of 8am but neither the quiet nor the marginal plus signs would last. 8:29am saw heavy volume (1100+ lots) as prices plummeted 2c, a familiar trade, and even heftier volume across a 3 minute spread starting at 8:37 as the lows were traded. The sell-off was arrested at trendline support, at least basis KC2/KCK, as the low came in about as perfectly at the intercept as possible. A lack of follow up selling and a friendly turn in the BRL prevented further losses, yet a return to positive prints was not in the cards. Competing export inputs were released as well; December Honduras exports fell 17% YoY to 281,471 bags as the hurricane disruptions and high diffs limited shipments yet global exports for November were pegged at 10.15mm bags, +5.7% YoY driven by Brazil, Colombia, and Indonesia. KC again underperformed the broad agricultural basket – the lone BCOM AG subindex component to decline – driving speculation as to whether coffee is the short leg of the new year inflation trade with spreads breaking again, HH -8.70, or if it is again just a day delayed. Robusta shed $7 as well, falling to 1365. Spreads were steady in London with H1/H2 settling unchanged and H1/K1 a dollar firmer at -9.
Arabica closed the day 126.15, -2.10, as new year flows proved to be negative at least for a day. Early returns were strong elsewhere in the ag complex with KC the lone decliner as the traditional pit hours kicked in. While the low was found around 9:30, a macro turnabout put the brakes on any would-be climb higher – of the 9 commodities in the BCOM AG sub index only 3 were still positive by the time KC closed, though 2 of those 3 were sugar and cotton, co-softs that one would think would see similar basket type flows. Perhaps Friday’s December grading appeal was the unique input along with the covid and political issues that ended up dragging global markets – it certainly did not help fundamental trader sentiment. Volume was above average as one would expect with the new year flows. London suffered less on a relative basis, falling $14 to 1360. H/K was a mere $1 weaker at -10. Neither market saw much change in structure. Jan tenders remain stuck at 1636.
Arabica closed a rocky 2020 on a strong note, gaining 285 points to settle 128.25 on volume well above recent averages. 2020 recorded an inside year with a small price decrease, forming something close to a dragonfly doji in the process (131.90 open / 130.15 close KC2, 135.45 high / 94.55 low). H1H2 closed unchanged at -8.00, as did H1K1 (-1.90) and K11 (-1.70). On a YoY basis that is tighter for the spot HK which closed -2.20 on Dec 31, 2019 and well inside of the H0/H1 which closed -10.15 on Dec 31, 2019. Certs were unchanged on the day with no movement in pendings and a small 300 bag decrease in Honduran stocks. Certs fell 612,247 bags on the year, though the makeup is quite different with Brazil’s now 26.4% of the stock and growing while Honduras is 58.5% (the lowest since Jan 2019 when Brazils stood at a single lot equivalent) and sinking; these contrast with 0% and 68.7% a year ago today. It would be facile to say this is the year everything changed, but it many ways it is true – consumption trends were shattered, Brazil asserted a new level of dominance in both markets as local prices soared to all-time highs even with bumper crops and other origins struggled under the weight of a low KC prices, and exchange inventories initially built on old Centrals, rapidly fell, and built again, albeit to the lower YoY level with Brazil the new swing “mild” origin. With recent weather events impacting forthcoming crops, a new regime potentially ahead in FX and inflation, and great uncertainty on both the demand side and the future of the Ice stock, 2021 should be a remarkable year. London meanwhile remains stuck, gaining $10 to close 1386. OI in F is still a chunky 4909 lots with nothing tendered today. Incredibly zero options traded in Robusta to close out the year.
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