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Arabica Coffee Futures for September delivery settled 190 points higher at 137.85 cents per pound. Price began the session with little activity, until US GDP figures were published showing a disappointing 2.6% growth over Q2, weakening the dollar and prompting system buying across the commodity sector, and speculative short covering. Volume duplicated in a matter of 30 minutes, as participants rushed to buy upon finding support at the 135.00 level. Prices consolidated near the highs during the remainder of the session. A firm Brazilian real dissuaded further origin selling, strengthening 0.53% to USDBRL3.1331. During the week, prices continued their up-trend, recovering from a sharp selloff early on. US economic news added volatility to the commodity sector, with the US FED interest decision on Wednesday and US GDP today causing prices to trade in a 9.55 cent range. Book squaring ahead of the end of the month prompted additional short covering. Support was noted against the 20-day moving average, with prices breaking through the 100-day moving average to the upside to mark the fifth consecutive positive week.
London failed to capitalise on New York’s gains closing out the week firmly within the recent range. Gains in NY were soaked up by a widening arbitrage (the Sep/Sep differential moved out to 41 cents) consigning values in London to hold around unchanged for much of the session. As if to underline Robusta’s weakness, the nearby structure also slipped; 3,800 lots of Sep/Nov trading as values fell back to $12 premium. Given the sideways price action, outright price targets remain unchanged both sides of the market with $2150-2177 holding as resistance and $2078-2068 support. The July delivery saw an additional 901 tenders today, bringing monthly totals to 7178 tenders and 4 re-tenders with one session remaining
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Arabica Coffee futures traded higher on Thursday, after yesterday’s 4 cent bounce. The active contract for September delivery settled 115 points higher at 135.95 cents per pound. Prices reached early highs at the opening, filling up a gap from the 6-cent drop from a couple of days ago. Prices consolidated sideways, uncovering origin selling during the short-lived rallies. Nearing towards the close, prices recovered from negative territory, closing at the 100-day moving average (135.70 U). The commodity complex was once again helped by a recovery in crude oil, although a stronger dollar ahead of GDP figures tomorrow limited the upside. The Brazilian real weakened 0.57% to USDBRL3,1544, prompting origin selling. Volume remained stable at 31,371, while open interest was seen decreasing 2,575 lots, suggesting further short covering during yesterday’s recovery.
London failed to attract sufficient follow through buying to pose a serious test to nearby highs, instead remaining firmly operational within the recent range. Overnight Dollar weakness following the conclusion of the Fed’s meeting saw a more bullish tone among traders ahead of the opening, although this never fully materialized into a prolonged test to the upside. With commercial interest thin on either side of the market, attention turned to New York, but a stumbling performance in the ‘C’ contract did little to attract fresh interest into London, which ultimately closed the session around unchanged. The Sep/Nov spread did turn over some reasonable volume, trading a $7 range through 2500 lots with further decent volumes seen in the Nov/Jan. With only 182 tenders for the session and front month open interest at 1438 lots, it is expected that a considerable open interest will be carried into the final couple of sessions of the month. Following a 2 day sell off, New York and London recovered nicely as the Robusta market took the lead, while N.Y. initially went along for a sympathy bounce which attracted momentum buying and traded to a new intraday high post London’s close. A market largely dominated by system spec flows, has found fresh directional coffee fundamentals scant, while finding support from a weaker dollar overall, and specifically a recovery in the Real. The Brazilian currency ended a 3 day decline after falling the most in a month on Tuesday, encouraged by the government assuring investors its 2017 fiscal goals are achievable. Technical related buying emerged smack at the 13345 uptrend line of support and today’s 415 point rally placed the settlement back above the 100 day moving average. The market has failed to settle above the 200 day average since the 23rd of February, which at 143.58, 5 cents above today’s settlement, is worth keeping an eye on.
Arabica coffee futures for September delivery settled 195 points lower on Tuesday at 130.60 cents per pound, pressured again by technical factors. Activity was slow as typical of the summer, with the price action accelerating when the market broke the 132.00 key level on the September contract. The dollar recovered from early weakness as the repealing/healthcare perspective turns more optimistic in the US Senate. The us/real went up 182 points to USDBRL3.1654. The weather in Brazil remained dry across the coffee belt with temperatures in the 40s and 50s, turning cooler during the next 6-10 day period, but without any frost threat, according with analysts. In other markets, crude oil gained 3.0% to $47.90 per barrel, after Saudi Arabia promised to cap exports to 6.6 billion barrels per day in August or 1.0 million barrels per day less than August 2016. Equity markets were firm, posting new highs.
London remains firmly rangebound for now, defying further weakness in New York to hold around $2100 basis September. The arbitrage narrowed through 34.5 cents, having traded out as far as 40 cents last week, as London held resolutely around the $2100 option strike. A brief test through yesterdays lows failed to attract additional technical selling leaving the short-term parameters intact, for now. Activity surrounding the July delivery month has slowed over recent sessions with only 11 tenders and 4 re-tenders since the beginning of last week. Open interest for the contract month stands at 1,620 lots with under a week to go until the last trading day. Attention turns once more to the macro with the culmination of the Fed’s two day meeting due tomorrow, post market hours. Arabica coffee futures lost 2.9 percent on heavy speculative liquidation Monday. The most active position, September, closed 400 points lower at 132.55 cents a pound. The bearish tone was set by the COT figures released Friday after the close, which suggested that the non-commercials recent short-covering could be ending soon, and at the same time, that commercials have begun to re-establish the short hedges. Volume reached 40,630 lots, including 6,866 switches. The nearby Sep/Dec declined 5 points to end at -3.60 cents. Temperatures in Brazil were reported in the 40s and 50s across the coffee belt, and will remain similar for the rest of the week. No frost concerns for the moment. Also, a weak technical performance encouraged the spec selling, after coffee prices did not have the strength to fill an opening gap. Short term support is now at a 132 and 129.5, and resistance is at 135.80 and 137.25. The dollar was steady and slightly higher. Wall Street traders are focused on the Federal Reserve which will announce Wednesday its decision on interest rates, after its two-day meeting.
An air of bearish sentiment greeted the start of the new week as trader’s digested weekend CFTC Commitment of Traders reports showing a quarter of the managed money net short position had been liquidated in New York. Lacking fundamental stories of its own accord, London looked to the ‘C’ contract for direction and tracked a wave of technical selling to close $40 lower. With origin pressure all but absent, much of the selling came via short term spec traders, with a void of resting commercial buying doing little to stem the negative momentum. Values remained supportive around $2100 basis September with a double low having formed at $2099 which technicians will look for a breach of if the market is to continue to search for lower prices. The Sep/Nov switch traded better volumes throughout the session, turning over 2600 lots through a $5 range, uncovering support around $15 premium once more. COT numbers released in London showed a 1906 lot increase in the managed money long position which now stands at 21,197 lots long. Arabica Coffee Futures finished higher on Wednesday, with the active contract for September delivery up 90 points at 135.80 cents per pound. Prices consolidated with little action during the early trading hours, until a wave of buying quickly pushed prices past recent highs. As participants focused on the arbitrage between New York and London, New York saw light origin selling amid stronger producer currencies. Buying towards the close pushed prices back up to intraday highs. The Brazilian real strengthened 0.31% to USDBRL3.144. Temperatures in Brazil remain low, with lows in the next couple of nights likely to fall to the mid 30s and low 40s in southern Sao Paulo and Parana, yet no risk of frost is expected. From a technical standpoint, short term oscillators remain in overbought conditions, as prices consolidate near the weekly mid-band and 100-day moving average. Colombia will be closed tomorrow in observance of the Independence Day.
London observed a narrow range through much of the session before weakness inside the final thirty minutes saw values fall and settle below short term areas of support. With commercial activity thin, a more subdued Dollar did little to attract short term interest in to London with values content to hold around the 10 day moving averages around $2119. Moderate selling pressure was generated via the arbitrage with the Sep/Sep widening further though 39.5 cents; levels not seen since 05 June. The late breach of the double low at $2117 leaves London open to a test of the psychological $2100 barrier and further areas of support around $2064 although lacked sufficient time for any further follow through activity. The Sep/Nov spread weakened into $15 premium through 1900 lots and will remain carefully monitored having found support at this level for the fourth consecutive session. Good options volume was generated with 1250 lots of Sep17 2050/1950 put spread trading at $22 with an 18% delta hedge at $2128. A further 1250 lots of Sep $2100 calls traded at $72. Arabica coffee futures declined from the 6 ½ week high, on speculative liquidation. The most active contract for September delivery settled 15 points lower at 133.55 cents a pound. Without new fundamental developments to give a clear direction to the prices, participants opted to play both sides of the market, causing some volatility to the prices. Low temperatures in South America caused extreme cold and some snow events during the weekend, however the jet stream kept the mass of polar air south of Brazil, out of the coffee areas. Temps will gradually rise during the second half of the week.
• GCA June US stocks up 180,422 bags to 7,295,945 bags. This is 1,084,000 higher than June 2016 and the highest since 1994 • Colombia markets will be closed Thursday on observance of the Independence Day. With commercial interest thin on both sides of the London market for now, outright values traded a narrow daily range, instead observing movements in New York. Prices failed to press higher following Friday’s encouraging settlement as intra-day longs backed away having digested weekend CFTC reports showing managed money short covering earlier than many participants anticipated. Following this news, the London COT report released around midday showed a 2412 lot reduction in the managed money net long which now stands at 19,291 lots long. Many will look to these figures and attribute to the widening of the Sep/Sep arbitrage by three cents over the reporting period. Certified stocks were unchanged at 15,259 lots and although the pace of the fall looks to have slowed for now, the market will continue to carefully observe stocks over the coming sessions. Grading’s have diminished over recent weeks with nothing shown to the board so far this month. The last Grading’s were reported on 30 June, taking the monthly total to 189 lots. Arabica coffee futures extended gains today helped by the technical action. The most active contract for September delivery settled 250 points higher at 133.70 cents a pound. The breaking of yesterday highs triggered technical buying as prices exceeded the June’s area of resistance. Volume reached 42,534 lots, including 7,844 switches. A weak dollar supported the commodity complex. The dollar fell following the US inflation data. The EURUSD was firm as the ECB plans to reduce the monetary stimulus. Oil prices climbed to tally 5.2 % for the week. The Bloomberg commodity index up 0.9% to 82.78. Firm real discouraged coffee sales in the local Brazil market. During the week, Arabica coffee prices recovered 3.6% or 465 points, totaling gains of 16.30 cents since June 22. The temperatures in Brazil are expected to be cooler across Sao Paulo and Parana early next week, dropping to mid to upper 30s in some spots. Frost is not currently expected, CROPCAST. In Medellin, the First Coffee Producers Forum ended. The producers countries decided to create an action plan to improve the economics sustainability of the sector. Different actions will be taken to have a better understanding of costs and coffee prices in NY and London exchanges. The forum was attended by more than 1,200 delegates. On Monday the GCA will publish the US green coffee stocks at the end of June. Last year, the stocks registered an increase of 126,000 bags and the 5-year average is of an increase of 168,000 bags.
London observed a holding pattern through much of the session, content to play the role as the secondary market to New York. Further moves higher were limited by the arbitrage as the Sep/Sep widened to 36 cents as the ‘C’ contract moved up, buoyed by U.S Dollar weakness and further speculative short covering. Scatterings of Asian selling were observed once more towards the top end of the daily range as values failed to test the nearby high at $2177 which remains as the short-term target as we head into a new week. Overnight open interest fell by 2315 lots, largely a result of 3212 lots tendered yesterday in the July delivery month. Open interest in the front month now stands at 1665 lots. Aside from the nearby highs, many participants will look towards the option exposure resting above the board if the market is to progress higher next week. With 5900 lots and 4000 lots of call exposure at strikes of 2200 and 2250 respectively many expect these to be influential if outright values can break higher over the coming sessions. Arabica Coffee Futures began the session firm on Thursday, breaking through recent highs on good volume. Over 40,00 lots were traded during the session. The active September contract rallied 360 points, settling at 131.20 cents per pound. Continued strength in the Brazilian real after yesterdays close from the recent political corruption developments held back origin selling as speculative participants covered shorts against a high call open interest. The session began with over 2500 open august Calls between strikes 127.50 and 132.50. In related news, Safras & Mercado noted that the Brazil 2017/18 coffee crop is 56% harvested. This is slightly lower than the harvest last year when 58% was completed and the five-year average of 57%. June GCA inventories will be published on Monday. Stocks have increased 168,259 bags on average over the past five years. Last month, inventories increased 224,169 bags, reaching 7,114,523 bags.
Lingering supply concerns for Vietnam and Indonesia across the latter half of this year brought an air of bullish sentiment to the opening of the London market. An upward trajectory was maintained throughout with only scatterings of origin selling returning towards the highs of the day’s range to halt values tracking New York ever higher. Technicians will look for a weekly settlement above $2177 basis September as a short term target for London if the market is to test to psychological $2200 barrier which holds 6000 lots of call option exposure. The pace of the drawdown in Robusta certified stocks slowed overnight with a 44 lot reduction taking total certified stocks to 15,334 lots, with little change in the Sep/Nov switch, which traded a $5 range through only 1500 lots. Activity surrounding the July delivery month picked up with 3212 tenders for the session and participants anticipate a significant reduction in front month open interest when tomorrow’s numbers are released. Arabica Coffee Futures traded slightly higher on an inside day on Wednesday, with the active contract for September delivery settling up 70 points at 127.60 cents per pound. Prices consolidated within yesterday’s range, supported by a firm Brazilian real. USDBRL strengthened 1.39% to 3.2066 on news that the former Brazilian President Lula was found guilty of corruption. Volume reached 21,861 lots. Open interest figures increased over 4500 lots yesterday, suggesting additional short positions entering the market. Prices once again found support near the 20-day moving average, respecting yesterday’s high and low. CONAB published their estimate for Brazil’s private coffee stocks at 9.86 million bags, 27.4% lower than in 2015. In macro news, Fed President Yellen began her testimony against the US Congress, noting that gradual rate hikes, and reducing of the balance sheet are in the pipeline.
Significant drawdowns in London certified stocks attracted the attention of participants with 1000 lots having been drawn over the last three sessions. Stock numbers have maintained a steady downward trajectory since the middle of May, with this recent surge lower taking certified Robusta numbers to the lowest since January 2017. The Sep/Nov switch is likely to operate under renewed scrutiny over the coming sessions although held comfortably within the middle of recent trading ranges around $19 premium as the market digested the news. Continued commercial inactivity saw outright values post an inside day as London failed to generate momentum in either direction. With newswires thin on both macro and fundamental stories, many await activity on the July delivery month for further market signals. Zero tenders for the session leaves the monthly total at 2812 lots with 4877 positions remaining open in July17. Further down the board a 2000 lot EFP was posted basis Sep17, following on from yesterday’s 1487 lot posting in |
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May 2018
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