An electric day of trading in the coffee markets as Arabica printed another contract high (163.15) in KCN before settling 162.35 and Robusta roared to life with a $66 gain to 1583 (1602 high, RCN). On a 2nd month continuation, today's peak of 165.10 was the highest since Nov 2016 when prices hit 179.55, while RC2 traded its highest level (1623) since Nov 2018. Futures accelerated from the opening on an overnight article around the ongoing water crisis in Brazil and the state governments for 5 key agri regions attempts to reduce stress on a national electric system reliant on hydro power. Buying was noted out of Brazil as risk management considerations were key and the gamut of specs, roasters, and trade all participated in various forms on the upward push. Volumes stood out as interest was uncovered down the curve; KCZ estimated outright traded was double that of yesterday and the highest in a month, while the front 3 contracts saw their best outright activity since May 6th. Spreads continue to trade in size (25,233 total) at the familiar -1.95 / -2.00 pricing as the roll out of N picks up. Option volumes were spectacular as well, 43,838 total, the most since March 2020. AA’s were also noted down the curve, including 9 lots in March 2024, the longest dated contract listed. London typically failed to keep pace as the NN arb traded to 91.50 before settling 90.73, yet was impressive as well in its own way. RCN outright activity (12,250) was more than double the 10 day average (5358) and more than triple Monday and Tuesdays’, while aggregate volume was the most since May 5th. Spreads were active there as well in the prime of their Index period, yet saw little change, N/U widening $1 to -22 and U/X tightening $2 to -15. As a reminder both markets will be closed Monday
KCN closed 155.70, +5.20 (+3.46%) while Robusta gained $15 to 1503 (+1.01%). The arb widened to 87.57c in the active or 88.43 in the 2nd month continuation, the widest it has been since mid-January 2015 when prices were respectively 179 and 1998 on the downslope from the Oct 2014 240+ highs. Volume was resurgent in Arabica where all the focus seems to be (the arb / relative lack of robusta follow along with perceptions of the balance sheet breakdown helps foster this), as estimated outright volume in KCN hit 17,952, the most since May 6th, a date which featured a 445 point leap through the 150 line. For the 3rd day this week futures have climbed post settle as well, though today in doing so it erased an initial pullback before recording a final print of 155.95. Headlines and technicals went hand in hand on the push higher; an early quiet was pierced at 8am as futures ascended from 151 to the day’s high of 156.75 (a lifetime contract high for KCN21 and the highest price in the continuation since January 2017) over the next 45 minutes with no real reprieve. Natural longs were noted futures buyers as prices rallied, in part thanks to a story about default risk in Brazil. While this has been a noted topic amongst the trade, it is not clear what, if any, imminent impact there is on the futures market – many believe it will remain an issue for the cash markets to sort out. It would seem that much of that buying was more technically or financially biased rather than due to market view. Notably roaster activity was reported to be muted as spot inventories and reported comfortable replacement diffs from origin offer little appearance of nearby supply constraints. The spreads were uneventful, N/U unchanged at -1.95 and N/N 20 points stronger at -8.55, albeit well within recent levels. Certs were mixed, Brazils rising 7075 bags, Hondurans falling another 4211 (6261 in 3 days), Peru down 1000, and Rwanda and Burundi ticking lower as well. In aggregate exchange stocks were up 1512 bags, driven by a 3555 increase in US ports, while pendings fell 10,720 to a still material 93,077.
Arabica closed the day unchanged at 150.95 on another day of light volume, yet nonetheless was the 4th best performer in the BCOM. London lost $12 to close 1490 on a slight increase in trading day over day, yet still failing to crack 10k aggregate lots. Prices were on the upswing early, peaking just before 8am with a 153.65 high, and recording a second push higher roughly 2 hours later as KC led the commodity complex. Cotton charted a similar path and both saw a similar uptick in selling – KC notching its best volume on the day as prices fell sharply at 10:20am – the only 3 minute period of trading that cracked 500 lots in KCN. NU continued to be supported at -2.00, though since Monday only 1682 lots have traded on that bid, while 4929 (out of 8645 trades total at the price) have traded on the -1.95b. Overall it was a fairly quiet session, with choppy rangebound trading taking over for the balance of the day after that 10:20 selloff, with even the settlement period driving minimal additional trading. Certs continue to surprise in their ascent, even if they are no longer the driving factor in futures, as pendings ticked higher again, falling just short of 100k at 98,254.
Coffee fell 185 points to 150.95 in the front KCN contract (-1.21%) and Robusta lost $13 to 1502 (-0.86%) in what was a challenging day for assets overall. Volume was underwhelming, particularly in Robusta where the aggregate 8034 lots trades was the lowest since the end of March, as traders waited to see what would be in store with this afternoon’s Fed minutes & risk suffered as cryptocurrencies fell on Chinese regulatory warnings for digital coins. A number of global inflation prints came in early showing an uptick in CPI (Europe, UK) for April, as well as an above consensus May preview in Brazil. With hyperfocus on the potential for a macro shift in expectations risk was pared in predictable ways; commodities (ex-precious metals) and equities fell, while the USD rose against G10 peers and EMEA / LatAm alike and the US 10Y yield spiked to +2.5% around 3pm EDT. Coffee outperformed the commodity basket as a whole as energy was particularly troubled, yet the loss was right in line with the avg 1.28% depreciation across ag & livestock markets. A steady bid in N/U kept support at the -2.00 line for another day, and the switch closed unchanged at -1.95 and N/N widened a tick to -8.30. What direction the markets take tomorrow will be interesting to follow, if there is a homogeneous reaction at all. Via Morgan Stanley Research “there were a few notable surprises within the April FOMC minutes that suggested after a meeting where the Fed showed incrementalism in adjusting its policy language, under the surface there were "a number of participants" pushing for further incremental steps on adjusting policy in the months ahead.”
Arabica gained 705 points (4.84%) to close 152.80 while London rallied $56 (3.84%) to 1515 and the arb widened to 84.3. Volume was up from the past 2 days’ sleepy trading, yet even with a 640 point range (prices gained 90 points after yesterday’s 145.75 settle to go out trading 146.65, then gapped higher to 147.30 in opening trading vs yesterday’s 146.90 high), estimated outright volume was only 4200 lots above the 10 day average, and a reasonably docile day in spreads kept total exchange volume less than 300 lots above the 10 day average. The rally was in effect immediately after the open, as prices gapped higher extending yesterday’s post-settle gains and more. An article highlighting the ongoing dearth of rainfall in Brazil was at the top of the Bloomberg ticker after yesterday’s close, driving fresh eyes to, as they stated, “World’s Oranges, Coffee at Risk as Brazil Runs Out of Water.” If such a headline was not enough, currency tailwinds aided the futures contracts, and it appears some took the GCA as a bullish signal, although that was a less favored narrative for the day amongst traders. Liquidity picked up as prices rose higher - volume traded on the offer outpaced the volume on bid 10,120 to 8073 – yet volume on the bid was actually heavier at 150 and from 151.50 to 152.50, suggesting that sellers perked up at round number resistance (150) and around 600 points up on the day. While the headline story was seemingly the catalyst for the move, there were likely some underlying flows also aiding KC. The BCOM Softs subindex was all positive, with Cotton gaining +2.05% and Sugar +1.29% on a day when the BCOM was marginally lower overall. Cocoa and OJ – markets excluded from the BCOM – failed to generate positive performances, even with OJ sharing the ticker headline. Spreads gained, though perhaps not in the way some bulls would have preferred, as NU picked up a tick to -1.95 and NN rallied 30 points to -8.25. The charts will rollover tomorrow for continuation purposes with KCK1 going off the board, KCN1 becoming the front month and KCU1 the 2nd.
Arabica gained 75 points to 145.75 while holding the uptrend line and trading an essentially equivalent VWAP (145.77 vs 145.69 Friday), while Robusta fell $1 to 1459. Friday’s COT was taken as a non-event at best, or disappointment for some, though it bears noting that a 975 point settle to settle rally, or 679 points VWAP over VWAP on excellent volume only generating a net buy of only 794 lots from the non-commercial perhaps gives some indication of the liquidity balance. With demand trends & supply disruption both on traders’ minds today’s GCA report is the next opportunity for an injection of life into KC. With a 5,762,567 print, +83.405 MoM / -111,409 YoY, well within commercial traders’ range, it seems unlikely to have much impact. Volume certainly suggested a lack of commitment as total exchange & outright volume in the 2 most active contracts alike were its lowest since March 17th. Given focus on inflation, if the GCA number fails to provide market direction (a reasonable bet given even the fleeting impact of the surprise grading in NY, combined with the lack of surprise factor), perhaps Wednesday’s Fed minutes could. While nothing is expected, it is the most logical next point of focus for a market is search of inputs. As Morgan Stanley Research notes, “let's not forget that sustained higher underlying inflation, as well as longer-run inflation expectations fits the Fed's framework and to the extent those increases remain modestly above what's consistent with its 2% goal, the Fed would be pleased.” Spreads weren’t able to keep pace, as NU weakened a tick to -2.00 on unimpressive action and NN a pair to -8.55. Shorts see little rush to roll and the -2.00 bid was quite accommodative well before the roll period as the net Index long sits at a record 79,230.
Arabica slid again, losing 140 points to close 145.00 on thin volume, while Robusta performed equally poorly, losing $35 to 1460 as the arb stays at 79.5. Prices were under pressure early after yesterday’s surprising pending build in NY, and a 2000 lot sale order in U/Z (-2.65, -0.20) to open the day was taken as a proxy for a negative commercial response to the data. Prices remained weak in the run up to the BRL opening, at which point the familiar proxy trade was back on and KC was the beneficiary of the currency tailwind, along with rising risk assets across the board. An emphatic move higher at 9:45am, sending KC to an intraday high of 147.75, was short lived however as short term specs took advantage of the higher prices to sell yet found a vacuum of replacement bids as KC tumbled 2c in a 10 minute span. An interesting technical picture has emerged with a neat downtrend channel in place from May 6th high, yet trendline support off the early April lows continues to hold as well forming a flag; 146.40 projects as the key intercept for next week. Meanwhile laddered moving averages below and the 1 year 23.6% retracement at 141.96 should offer short term support. On the Robusta front the COT revealed less turnover than man had imagined, as managed money added a net 4527 lots to 31,251, well below trade estimates, and commercials sold a net 4152 lots for a 42,406 net short. Both are sizeable positions, yet something less than max. On a day where London seemed unusually weak, keeping pace with her sister market, prices managed to find support at the 38.2% retracement of the YTD range (1457 vs 1456 low print).
Coffee fell 10 points to 146.40, a fair representation of the overall day’s trading (146.21 VWAP), while Robusta fared less well, losing $19 to 1495. It was a curious day in all; while equities and commodities alike began the day under pressure, and Cocoa (a somewhat if not completely “off-broadway” market as a non-BCOM participant) closely tracked the DXY, Coffee began to take its cue from the FX world as well. By 9am KC was the lone non-meat market in the black, and while the Dollar had been a rough gauge for KC support early, the BRL reassumed its position as the key input upon commencement of BMF trading. That in itself was remarkable given overall external forces, although it bears mention that KC has not been the most inflation correlated commodity (logical as it is for that to be true). However, what was equally noteworthy was the quiet strength the market maintained from 11am through noon, as both the BRL and DXY turned headwind yet KC remained stubbornly elevated, trading between 147 and 147.50, just off the day’s 147.90 high. It is unclear what held KC aloft through that typically, and manifestly, quiet window, but shortly after 12pm EDT the gravity of the day became too much and Arabica fell into and through the settlement window, generating that negative closing print. Nonetheless at -0.07% down on the day, KC was just off the commodity leaderboard’s pole position. Safe-haven Gold gained 0.16% as of 2:55pm, the lone better performer on the day at the time of writing. On a day of head-scratching trading, one of the bigger surprises materialized after the close. After pendings had run themselves down to a mere 16,360 bags and it looked like the grading campaign was nearly over, inventories awaiting Ice’s blessing roared back a net 50,946 to 67,306 total. While that in itself would be noteworthy given timing, the destination was moreso. While the market has become desensitized to European grading, New York saw 50,586 bags join the party, remarkable for a port that currently only has 40,673 bags of certs in total. Given replacement differentials, futures prices, and the perception of improving demand in the US, it is quite possible that the grading is simply good risk management, a “call” of sorts on margins. Whether the market takes it as such, or rather a surprising signal of softer than believed demand, will only be known in time. NU closed unchanged at -1.95, while NN fell a relatively dramatic 35 points to -8.00. Robusta saw its heaviest outright trading in the July contract since May 6th, roughly 4600 lots above the past two days. Notably, this was not true in U or X, and spreads were below average as well. The bid / ask volume split was virtually identical, so OI will be worth watching for insight into what drove this activity in the spot contract.
Arabica gained 205 points to 150.10 while London trailed behind with a $14 gain to 1532. Certs cracked the 2M mark as expected, ringing in at 2,005,124 bags, yet it did so on a second consecutive day of less than impressive results (55% pass rate) after consistently notching near 90% effective approvals for the year to date. With trading quiet overall, even amidst a volatile session, much of the chatter was focused on considerations both familiar (margins, certs, demand anecdotes) and extended (perhaps the earliest attempts by clients to sniff out consensus on a GCA number we can recall – that data will be released Monday). KCN outright volume was at its lowest since pre-May FND (April 21), 4k below the 10 day average, and total volume was its thinnest since April 22. This even as KC traded a 410 point range, trading as low as 147.55 in the early hours and arresting a 90 minute decline as low as 148.25 (after trading above 150.25 in the approach to 8am) just after 9:30. Prices largely followed the BRL, which in turn was closely matched with the BCOM. Aside from a 5th place performance from copper, the top of the commodity complex was littered with Ags; sugar led the charge and W, S, C, BO, LC, KC, and KW rounded out the rest of the top 9, each gaining at least 1.3%. Roasters are not yet willing to chase, origin has nuanced limitations on flow, and with spec positioning already heavy, perhaps it shouldn’t be a surprise that familiar intraday proxy trading drove price on an otherwise quiet day. While the 2c gain was impressive, the day over day VWAP was up only a single tick, 149.96 to 150.01, marking the 150 / 152 range a 4 day area of increasing congestion. Structure reversed yesterday’s losses, gaining a tick in NU (-1.90) and two in NN (-7.65).
Arabica lost 485 points, settling 148.05, while Robusta shed $21 to 1518. Prices were goosed going into Friday’s close, recovering what was otherwise a challenging day of trading for the bulls and at least early it seemed like that flood of buying would have a lasting impact. Futures opened around last week’s closing levels and a slow grind lower during the overseas hours was arrested by 6:30am EDT, with KC pushing the intraday high to 153.45 around 8am. By 8:30 however optimism began to slip, and KC was unable to fend off short term selling both specific to itself and overall weakness that settled into commodities from 9:30am or so onwards. Both price and timing seemed to be an issue for natural buyers, as industry and other discretionary traders took a wait and see approach, with an intent to hold out for either more clear value around support (low 140s to mid-130s for the ambitious) or confidence that a new value floor might be under construction by way of stabilization on increased flow. Instead, KC trudged ever lower marking a final print only 25 points off the low (147.50) after a discouraging settlement. With both key FX inputs little changed on a day scarce of economic data inputs, and Ags lower / precious metals higher, as the BCOM fell overall, KC had little in terms of spare tailwinds. Spreads weakened marginally on the curve, a tick in NU (-1.95), two in NN (-7.75), and certs fell a mere 326 bags shy of the 2M mark, a hotly watched number albeit more a function of statistical curiosity and humans’ apparent affinity for round numbers and symmetry than an actionable trade.
Write something about yourself. No need to be fancy, just an overview.