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Arabica Coffee futures for May delivery settled unchanged on Thursday at 139.30 cents per pound after trading within yesterday’s range on modest volume, 28,013 lots. Volume was propelled by 7,650 switches. Weakness in the Brazilian real, 0.55% to USDBRL3.1367, did not seemed not to influence price activity. Unemploymen figures for Brasil will be published tomorrow. Meanwhile, the dollar strengthened 0,49% after 4Q US GDP growth figures came out better than expected (+2.1% vs +2%). Lack of fundamental news was noted in the sideways trading. May futures have been unable to settle above the 140.00 level since March 23rd. From a technical standpoint, prices continue trading within the recent range, with resistance near the 20-day moving average (141.17 May) and support near the monthly low (136.20 May). In options, activity was subdued, with 100 lots of the June 137.50 Puts trading 100 times and the 147.50 Calls trading 80 times.
Activity surrounding the nearby structure accounted for much of the turnover throughout a relatively benign session in London. Flat price action remained influenced by the arbitrage as values tracked directional movements in New York with the May/May looking to hold above 40 cents. Scatterings of Asian origin selling kept a lid on prices through the early parts of the session, although was limited in volume and refrained from following the market lower as New York moved into negative territory. The May/July switch traded a $4 range, strengthening into $17 through 2000 lots. The posting of a 1977 lot EFP basis November boosted overall volume, following on from a further 1795 lots which was posted on Tuesday. With one day to go until last trade date for the March delivery contract, there were 16 re-tenders in London, with overall re-tenders now standing at 123 lots. Overnight open interest for March shows 95 lots remaining open which will be closely monitored by participants heading into the expiration of the contract tomorrow.
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Arabica Coffee Futures for May delivery settled slightly lower on Tuesday, giving back some of the gains from yesterday’s positive movement. Open interest figures showed short covering fueled yesterday’s price action, decreasing 1,244 lots. Prices reached an early high of 142.00 (May 17) at the opening, and consolidated lower throughout the session. Intraday short covering helped prices move higher halfway into the session, on low volume, finding resistance near the 138.85 on several occasions (May 17). In related news, landslides in Colombia have blocked important routes to ports, affecting the flow of exports. Additionally, the Australian Department of Meteorology (BOM) predicts a 50% chance of El Niño in 2017. From a technical standpoint, nearby May futures see resistance near the 140.00 psychological level and the 20-day moving average of 141.70. Support can be found near the December 2016 lows of 135.20, and the May 2016 lows of 130.15.
The Robusta terminal consolidated following yesterday’s explosive close, under pressure from a combination of origin selling and a reluctance for the May/May arbitrage to narrow through 40 cents. Although technicians would have been encouraged following a bottom reversal yesterday, values fell $6 off the opening bell as overnight Asian selling immediately weighed upon the market. A negative trajectory was maintained for much of the rest of the session, with the move accelerated as values drove through the 20 day moving average at $2175 coupled with a lack of resting buy orders. Arbitrage traders ensured prices remained suppressed throughout, with May/May holding above 40 cents despite moderate weakness in New York. Despite the flat price operating under pressure, the May/July switch strengthened into $20 discount through 1300 lots, although held a narrow trading range across the session. Good turnover was visible across the options arena, with 800 lots of the July 2400/2050 fence traded at $7 alongside 384 futures delta hedged at $2185. The posting of a 1795 lot AA in November provided further volume, which most participants have assigned to forward financing of the certified stock holder. Arabica Coffee Futures fell for the third consecutive day on Thursday. May delivery futures lost 120 points, or 0.85%, settling at 140.50 cents per pound. Volume remained relatively low, reflecting the industry attendance to the NCA event starting today, with a total of 22,356 lots. Prices began the session under pressure, following yesterday’s weakness. Gapping 20 points lower at the opening, prices consolidated 100 points lower before making an attempt to surface to positive territory. A short-lived rally brought prices up to positive territory before short-term liquidation brought prices back to the early consolidation area towards the close. The Brazilian real weakened 1.40% to USDBRL3.1303, adding to the negative sentiment. On a technically driven session, prices tested the recent low below 140.00 basis May. Breakage of the monthly low of 138.60 could push the market to test the previous lows of 135.00.
With little noteworthy action resulting from yesterday’s Conillon auction in Brazil, flat price activity was limited through the opening in London, which remained the case for much of the morning. Values looked to test lower as the States emerged on line, responding to weakness in the ‘C’ contract with the Brazilian Real operating under pressure. Light volumes of technical sell stops at yesterday’s low drove values through $2150, although further negative traction failed to establish as industry buying supported the market around the lower realms of the day’s range. The commercial short remained supportive of the May/July switch, which held at $22 discount throughout, although noticeably lower in volume following yesterday’s active session. Moderate activity was visible in the options arena, with 500 lots of the July 2000 puts trading at $27 alongside a 22% delta at $2175. There were 48 re-tenders for the March delivery contract, 20 lots of Conillon and 28 from Vietnam, with overnight open interest for the month standing at 143 lots. 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. |
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January 2019
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