Arabica ended the week +3.95, 20 points of the daily high while settling at 102.30. The highest settle since the beginning of July. Early trade had us already through the weekly highs and once the 8 o’clock hour struck volume kicked in, taking the market above the 50 day moving average and just shy of the upper Bollinger Band for the first time in ten trading days. Early Industry buying got the ball rolling which led to fresh shorts heading for cover on the move. The Structure continued it tightening ways with U/Z trading into -2.45 before settling +.05 at -2.50. Certs fell 16,599 bags to 1,598,597 with pendings remaining unchanged. Robusta was again the talk of the two markets, gaining $50, closing 1293, taking out the recent high of 1270 and back above the Fibonacci 3/8ths retracement (12/2019 1479 High and 4/2020 1479 low) and testing the 50% since early June.
COT net non-commercial numbers came in basically unchanged (-23,722).
Coffee tumbled again with KCN closing 96.75, -1.05. OI has rolled over into U, yet outright trading remains in KCN - although today may be the last that that statement holds true as U outright volume came within roughly 400 lots of N. Volumes ticked up in both futures and spreads on Day 4 of the index roll, typically the most negative of the period. It is perhaps a sign of the times then that N/U tightened 10 points to -1.80 after weakening for the prior 3 (typically stronger) days. Roaster buying was noted in increased volumes in all 2020 calendar contract months. The BMF will be closed tomorrow for Corpus Christi with no BRL or coffee trading. Although Sao Paulo had moved the holiday forward to accomodate social distancing, the exchange chose to keep market observation in place, thus tomorrow’s closure. Certified stocks fell an eye popping 36,931 bags, however pendings grew 29,885. Adding the 7046 bags that did not immediately get regraded to an expected 10,160 bags that will fail using recent passing rates, there is a “real” 17,206 exchange outflow. London was a mixed bag with the active RCU contract rising $6 to 1253 and the prompt RCN falling 7 to 1214. N/U settled on its low, -29, a mere dollar off the lifetime low. The USDA wrote down coming Vietnam crop on lower potential yields due to weather, yet it bears mention that conditions have deteriorated further since the time of the rainfall charts included in the GAIN report.
Arabica clawed back yesterday’s losses basis KCU, just missing doing so in KCN, which settled 98.90, +75. 8am sellers appeared sending prices to intraday lows (97.05), however a wildly off-consensus US payrolls number (anticipated 7.5MM jobs lost in May vs 2.5MM realized gains with roughly half coming via hospitality and leisure hiring) helped swing sentiment and aided a BRL recovery through the 500 line, peaking at 4.9349. KC did her best to ignore the 3%+ move in the FX, staying more broadly in-line with the BCOM, and to some extent that makes sense; while prices in BRL terms have plummeted from the record 6.50+ less than a month ago to 5.00 today, it is still a historically high price in a historically large crop year. This marks a 4th consecutive week of lower lows and lower highs, though the week’s trading was clearly consolidatory; the daily range of settles for the 5 days were all between a low of 98.15 and high of 99.10. Spreads closed the day down, with N/U falling 20 points to -1.75 and settling on the low. This is only the 3rd time in the past 17 index rolls that the first day saw weakness in the front spread. London was the stronger of the two markets, rallying $37 to 1233. N/U tightened as far as -7 before closing -12, up $2. Rainfall in Vietnam has not quite met up with forecasts, remaining something to monitor.
Arabica lost 95 points, settling 98.15 in choppy trading ahead of the index roll tomorrow. Futures opened down but steady, weakening on the open and holding mostly constant during the European hours. 8am buying marked a new high and suggested additional spec shorts were covered following yesterday’s close, but things unraveled quickly thereafter. A combination of weak commodities, strong dollar, weak brl, and risk off all coalesced allowing intraday specs to take control and wrestle KC prices lower. With trade content to job what appears to be a range for the near term and origin and roaster both apparently willing to wait before initiating further large scale positions, the day unfolded as one might imagine – supported into weakness, sold on strength, and generally following the path of the FX and commodity markets. N/U enters the roll period having shed yesterday’s 10 point gain with an equal loss, closing -1.55. N/N weakened 10 points as well to -9.00. Volumes were middling in every way as N and U outright trading saw their lowest volume since May 20th. Total volume was also at its least impressive since the same day, while spreads saw a small uptick from Tuesday, but otherwise was also at a low since May 20. Robusta was holding strong again until the settlement when prices plunged dramatically in verticality if not amplitude. In the end the books were marked 1196, -6 on the day as N/U gained another $2 to -14, only $3 off the -11 double top and 52 week high of April 8 & 9. Robusta certs fell another 7300 bags equivalent, leaving it a mere 65k bags from cracking the 2 million mark after standing at 2.23mm at the end of April and 2.395 at the end of March.
Coffee rallied 90 points, closing 99.10, posting strong gains between 8am and 9:30am NY time on a combination of recent spec shorts covering, roaster buying, and the BRL proxy trade as the FX climbed steadily higher. After reaching a peak of 100.75 in KC, trade profit taking seemed to initiate fresh short term system selling, briefly sending prices back into negative territory. The BRL however kept going, maxing out at 5.0181, and jobbers covered shorts for the final positive print. Spreads were strong across the front 3 switches, gaining 10 points in each, and closing 35 points higher at -8.90 in NN. NU went out -1.45, inside the recent range and stronger for a second consecutive day ahead of Friday’s index roll commencement. London also saw positive flows, outpacing her sister market on a relative basis, 1202, +23. Both spec and roaster buying was noted down the board. N/U pushed steadily higher as well on heavy volume (6200+), closing -16, +3. Both markets are recovering recent losses in what is otherwise largely consolidatory trading, each now only slightly oversold on a technical basis.
Arabica lost 10 points closing 98.20 after a session of mostly positive trading. Early hours were quiet and spec selling was noted at 8am, but the weakness was short lived. Motivated buying arrived shortly around 9am, pushing prices steadily higher for the following hour. KC tracked the BRL for the majority of the day, which of note has strengthened over 13% since early May but lost some footing leading into the settlement period while giving back 1.45 into the day’s end. Volume was well below the past 2 sessions with only spreads really standing out, suggesting most traders are maintaining their wait and see attitude. The spot N/U remained firm ahead of the approaching index roll, gaining 15 points to -1.55 while the rest of the curve saw pressure; U0/U1 weakened 35 points to -9.05. Robusta ended the day +$20 at 1179 settling back above the downtrend channel and posting its first higher high and low in 5 days.
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