Arabica held its ground above the 120 line, settling 123.50, +.90 while trading on heavy volume. Outright action in the active KCK contract saw its thickest trading since March 1st, bookending a month where coffee lost 925 points from open to close, and 1455 from high to low. While selling was the dominant feature through 10am, discretionary bids of various kinds helped managed the decline through the traditional heavy volume periods. A strong move in the BRL was a welcome aid for the bulls – a factor that in the past 2 weeks has been an unreliable indicator – as the FX gained 1.5% while KC traded and another 1% after the fact as a shakeup in the Brazilian cabinet and ministries over the past 2 days has driven optimism around budget progress. Economic data for the top coffee producing nation was poor (unemployment rate ticked up to 14.2%, Feb’s primary budget balance -11.8B vs +58.4B in Jan, net debt to GDP of 61.63%, just shy of December’s record 62.70%), yet for all but the unemployment rate was that data considered a beat of consensus expectations. Spread volume was resurgent as well, topping 26k for a second consecutive session, roughly 10k above the 10 day average, as the index roll approaches next week in advance of KCK FND. Structure was bid on that increase in activity, KN -1.90s, +.15, NU -1.90s, +.05, KK -9.25s, +.20. London was unable to keep pace on the day however, losing $6 to 1342.
Coffee finds a new reason to weaken each day it seems, leading the pack in an ugly commodity day lower, 122.60, -4.45, the largest one day price decline of 2021. Selling was relentless if not necessarily dynamic; volume continued to come arrive in an orderly fashion throughout the entirety of the traditional pit session as futures marched lower with no relief. The chart was remarkably similar to cocoa (the 2 worst futures performers in March save the VIX, followed by cotton and sugar), and KC shrugged off a strong performance from the BRL (+.80% around the time of KCs close). That familiar FX correlation has seemingly only worked on days of devaluation, while some other impetus is found on +currency sessions. While commodities as a whole were down nearly 1.5%, suggesting the continued negative effects of macro inputs in real time, KC’s table leading decline reflected the more specific technical hurdles coffee faces. Yield continues to widen, KK now at -9.45, -.25 combining with lower outrights for a 7.7% prompt roll yield (6.5% 2nd month), and the 20, 50, and 100 dmas all sit as overhead resistance while encouraging spec selling. Oscillators are now well oversold, suggesting a pause is due soon, but with month end tomorrow and roasters taking advantage of the opportunity for much needed coverage, a significant rally seemingly will need some effort. London trailed in sorrow, falling $28 to 1348, though spread there weakened for a second day as well (KN -25s, -4, NU -21s, -3)
Arabica fell 145 points to 127.05 on fairly low volume on a day where the macro winds offered early pushback, but where coffee also specifically underperformed. The BRL was an impediment from the start as the FX traded to its weakest level in 19 days, eclipsing the 5.80 mark in the process. While the currency was weighed down by a host of factors – contagion risk, Covid statistics, budget issues, plain negative sentiment – coffee had already been well into its decline before the currency opened, trading within 20 points of the intraday low during the pre-North American hours. While commodities as a whole were peaking around 8:30am KC was unable to get off the mat. The COT drove some of the specific negativity no matter if traders chose to look at the fund side (where shorts flooded in as 9 entities left the long side of the tape and 10 new shorts emerged) or the commercial side where needed paper was added both during the reporting period (+6,978 commercial longs, disagg w options) and anecdotally through the balance of the week, removing some of the sense of urgency from the roaster position. Nonetheless, material selling failed to appear as KC holds around recent support and the consensus bottom end of the range, and the 1.13% loss in futures was almost the same as the 1.19% weakening in softs. Spreads were unchanged in the front 2 period while the back end of the curve weakened further, KK -9.20, -.10, a 52 week low. With the issues in the Suez canal improving after the Ever Given began moving again, some roasters are likely feeling some relief with respect to their specific inbound coffee, even if total supply was never a concern given destination stocks. London declined more or less in line with her sister market, falling $23 to 1376. KN widened $4 as well, closing -21 after retracing Friday’s -15 high.
Coffee fell 250 points in mixed trading, settling 127.60. Prices gyrated throughout the session as spec flows dominated both directions and volume, while not dismissible, was certainly not impressive. Early weakness was noted from the start as futures were pressured by news of additional lockdowns in Germany – a key factor in a global risk selloff overnight. KC recovered just after 8am however, and tracked the BRL higher for the following 2 hours, maintaining that familiar correlation trade through the 11:20am EDT high and for another 20 minutes of backtracking. For unclear reasons that relationship fell apart as the BRL remained around its best levels of the day (5.49 vs 5.48 peak at time of close) and futures took an escalator down to intraday lows (127.45 low / 127.55 last print / 127.60s) with no real reprieve. As well trod as the 130 / 128 range has been in recent days, a late day axed buyer was nowhere to be found. The BCOM was down around 1.75% vs 1.92% for coffee so it may have just been a factor of trading one proxy for another with prices at the upper end of commercial interest. Spreads were weak overall, KN and NU both losing a tick (-2.05s and -1.95s respectively) and the KK 20 points (-8.75s) although not remarkably so – also at the lower end of the recent range. London meanwhile shed $21 to close 1377 while structure was flat.
KC fell another 95 points, a third consecutive day of lower lows, lower highs, and negative close, en route to a 129.00 settle and a fresh low for the week. On consecutive days Arabica has now closed below the 20dma (133.30) and 50dma (129.10), driving negative feedback from traditional chart aficionados looking for a deeper correction. A longer term view looks better with last week’s lows holding and 128 holding firm, a price only eclipsed once since Feb 22nd’s breakout – March 9th when futures fell with the BRL weakening on news of Lula’s potential return to politics before reversing higher and leaving patient industry buyers below. Structure was again mixed though slightly weaker as both the nearby (KN -2.05s, -.05) and 1 year (KK-8.65s, -.10) slide wider in the least dramatic way possible. KC had familiar company on an otherwise bullish commodity day as softs congregated in the back of the bus, KC -.73%, SB -.82%, CC -1.93%, CT -.64%, OJ -.77% (Sugar, Coffee, and Cotton were joined by Cattle as the worst performers in the BCOM), even as the commodity complex rose around 1%, the DXY was a negligible headwind, and the BRL strengthened an impressive 1.7% around KC’s close. Today was the last trading day for KCH1, so there should be a rollover gap on the pure continuation charts Monday morning. London fell $6 as well, settling 1380. Spreads gained a tick in the front 2 rolls, erasing yesterday’s loss.
Arabica recorded a particularly futures focused day as KCK fell 90 points to 132.10. Outright trading in K surged to its heaviest turnover in 4 days as the market settled 70 points below the VWAP and 10 below Friday’s VWAP. While broad commodity weakness can be blamed in part, select other ags that managed to turn positive and the DXY and BRL were both modest headwinds at most. The larger issue was a series of hefty sell side market orders, deployed through the intraday low (600+/- lots) and another through Friday’s low (another 500+/- lots) as KC recorded its intraday bottom. Each blow off encountered support, but outside of the deepest 80 points drove little in terms of aggressive buying. Longer term spreads floundered as well, KK continuing its outward momentum to -8.70, -.20, while KN (-2.00, -.05) and NU (-1.90, +.05) were a wash in the nearbys. Options were uncharacteristically quiet, paced by the N 135 C at a mere 537 lots. Coffee has a few new inputs on tap with today’s GCA stock report and Wednesday’s dual BCB / FOMC events. London closed 1388, $15 lower after Friday’s eventful COT. Spreads were little changed.
Arabica rallied 45 points, closing 130.85, a minor extension of yesterday’s gains. Volume was solid, though a step down from the past 5 days’ in outright terms, led in part by another heavy day of non-roll period spreading. 18,925 switches in total traded, with KN (-200) and NU (-185) both unchanged and KK extending its losses to -8.35, -.10. The BRL was favorable, stronger early and turbocharged by another batch of central bank intervention as the BCB sold US$405 in a spot auction; the currency was around 2% firmer at the time of KC’s close and +2.75% stronger (5.64+) in late trading. The dollar weakened as well and commodities were bid, all tailwinds as steady price atrophy from 8am through 11:00 was arrested above any sort of critical technical levels. The market still was unable to settle back inside the uptrend channel for the fourth straight day with the 9dma capping any upside movement, while the 50dma remained safely below. London was equally strong, gaining $10 to 1410.
Arabica shook off early BRL related losses in the process of climbing out of an intraday 2.55c decline, settling 130.40, +1.25. The Brazilian currency traded near 10 month lows after KC closed yesterday on the news that former Brazilian President Lula had his conviction in the Carwash scandal overturned, opening the door for him to run for office again, while setting the expectation for a poor KC start. The FX tumbled again this morning, recording a new low of 5.8789. Indeed this weighed on KC at the outset, though opening sales were quickly underwater and the overseas session was generally stable, followed by counterintuitive buying at the 8am bewitching hour. The BRL lows were in place and on their way to intraday recovery by 8:45am, and KC curved higher through 9:25, trading to the precipice of unchanged after holding around the 50dma for a third day during the traditional pit opening. With KC bulls optimistic at that point, sellers flooded in, wiping away the double bottom shared with yesterday’s action as coffee plummeted to 126.60, eclipsing the 2/22 breakout day’s low by 15 points. Opportunistic buying held the price steady and after an attempt to break lower, price reversed higher dramatically, trading 1200+ outright lots from 11:02 to 11:07 as prices spiked 255 points upwards. The shorts spent the balance of the session covering while urging futures higher en route to a final print of 131.70, just off the 132.00 high recorded in the post-settle hour. By end of day, not only had KC turned green, but the BRL was back in positive (if still historically cheap) territory and the DXY was down -.35% (at time of KC close). Nearby spreads were unchanged, yet the KK closed ticks weaker at -8.25, the lowest level since Feb 12th. London was even more impressive in terms of settlement, arresting 7 days of losses and $154 pullback since the end of Feb en route to a 1400, +39 day. Never digging quite the hole her sister market did, the path upwards was nonetheless just as steep. The heaviest volume traded at 10:24 as futures fell $10 en route to intraday lows (1330), while outright volume overall was stellar (12,416 in RCK alone).
Arabica posted a small gain, gaining 30 points to close 129.15. This was the first green bar in 7 sessions, staunching a 10c+ price bleed, though it was not always clear this would be the case. Early hours featured weak if tightly wound trading, and short term specs repeatedly tested the 128.00 low at the outset of the traditional pit hours. The 50dma (128.24) was breached in the process yet a persistent wall of bids ultimately sent sellers scurrying and jobbers covered and went long, driving KC to an intraday high of 130.95 in short order. Volume was fairly good though below Friday’s action. The spot KN was unchanged while KK weakened 30 points to -8.15. While certs rose again, increased by 8635 bags to 1,815,568, pendings fell to their lowest since Nov 24th (49,186). Robusta suffered more extreme opening weakness than her sister market, and less of a midmorning bounce from the lows, providing for a 1361, -20 performance. The COT drove negativity on that front, but it should be noted that the nearly complete reporting week’s average price is now in line with that of two weeks ago (1404 in both cases), albeit on lighter volumes. KN and NU both fell $2, to -21 and -17 respectively.
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