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The Arabica market settled with a 50 point gain at 93.15 amidst tranquil dealings in the outrights and an unchanged structure. Prices traded to the tempo of the BRL, for lack of a better excuse, with the high in both markets occurring shortly after the currency markets started actively trading. KC opened on the low of 92.55, then managed to trade a 6 day high of 95.10, before prices succumbed to a lack of upside momentum, and gravitational forces pulled the market back to 93 cents by the closing print. Open interest fell by 2,115 lots, its 10th drop in the last 11 days, and has fallen 25,395 lots since April 15th, the biggest caveat obviously being the approach to FND into 14 year lows. Across the pond, May open interest still stands at 4,238 lots while notices remain a scant 100 lots to date. Robusta traded an inside $13 session settling plus $4 at 1407 MT.
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The Arabica market accreted 65 points to settle 96.75 basis July, trading in a 135 point range amidst lackluster outright transactions. A firmer BRL ($R 3.82), helped keep coffee prices stable as Brazil’s annual inflation was reported to jump to the highest in more than two years on rising food and transportation costs. May/July steadily changed hands 18,585 times between 250 and 240 under on day 4 of the index roll. Open interest in May stood at 90,442 lots entering the day, as the contract with the highest open interest shifted to July, 3 days before May option expiry. May/July London traded 9,266 times and fell to 29 under, its widest active level, while the July contract traded a double bottom (1439), with yesterday’s low and settled with a $10 gain at 1452 MT.
KC spent the entirety of the day in positive territory closing up 70 points at 93.65 in the still-active May contract. Day 3 of the index roll did not disappoint with 35k+ KN AND 50K+ total spreads dominating trading. Structure finally tightened, moving 2 ticks tighter to settle -2.45, while posting a final print on the day’s high -2.40. Options were quiet, led by book cleanup type paper ahead of Friday’s May expiry. Softs were the best performers on the day as a basket, with sugar (+1.74%), coffee (+.75%), and cocoa (+.25%) all posting gains while energy, grains, industrial metals, and livestock all fell. Robusta closed unchanged basis July, 1442, unable to keep pace with her sister market in choppy trading. Aside from the opening volume, the best clip of trading came in the form of a mere 74 lot burst during settlement. K/N was an anchor on the outrights as it settled $6 weaker at -22. 800 N 1400 / 1550 CS at $45 was the notable option traded of the day.
A fresh 13 plus year low for the KC market, which saw the May contract settle at a contract low of 91.65 down 45 points. Today’s low of 93.80 was 30 points above the open gap from the September 30th 2005 low of 9350, to the September 28th high of 9300. Milestones are greeted as de riguer while open interest posted another new record of 357,447 lots, increasing today for a 17th day running (2,158 lots), and has surged 40,955 lots since the 11th of March. Second month Robusta traded to its lowest level since the 16th of March, 2016 while the front month contract settled at 1413 down $5 after breaching the 1400 level by $5 MT. It is proving increasingly difficult to accentuate the positive, eliminate the negatives and latch on to the affirmatives. At this juncture many would settle for messing with Mr. In-Between.
Coffee again fell to start a week, the 11th time in 14 opportunities to date. Prices slipped 240 points to settle 92.10 closely following the DXY, although no one appeared to credit the currency. Day 1 of the week / month / quarter notwithstanding, the setup was primed for a positive session that didn’t materialize. Risk assets were well bid after a strong Chinese PMI print (alongside that of other Asian EM), boosting equities, emerging markets, and most commodities. The BRL tightened nearly 1.5% as well. No other commodity came close to matching KC for incompetency; the 2.5% selloff was distantly challenged by gold, which was -0.45% at time of writing. Perhaps not coincidentally, the oil markets topped the leaderboard +2.45% (WTI) and +2.05% (Brent). K/N posted heavy volume ahead of Friday’s index roll commencement, trading 17k+ times in a -260 / -245 range before closing -250. After the COT reflected record non-commercial spreading, a 36k+ aggregate spread day seems appropriate. Robusta withered in-line with NY, albeit at the slower pace it is noted for, closing down $38 at 1418. The front month K/N spread weakened $4 to -19, perhaps in itself a primary example of the sentiment around coffee.
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October 2020
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