Arabica coffee futures for September delivery settled 195 points higher at 149.95 cents a pound. Speculative short covering lifted the market since the opening today. With near oversold conditions and prices respecting
the 146.50 support level, short players were encouraged to cover positions. A large expansion of the open interest during yesterday’s session suggests new shorts could be in a vulnerable position. The OI increased 4,535 lots as of July 6. The fundamental scenario that brought the prices to these levels remain in place and analysts have begun to foresee that the 2022 Brazil crop could be impacted because of the severe drought that
affected the coffee Arabica plantations since Q4 last year. The dollar traded higher backed by friendly language of the FOMC minutes. The Latin American currencies declined further, the Brazil’s real traded above R5.2800 for the first time since May 27. The COP traded at 3832, the lowest level since May 5.
The Robusta terminal ends the session over 1% higher as values pivot around $1700 basis Sep21, held by premium through sep21 and nov21 based structure. With the freight issues out of Asia dominating Robusta chatter, players in the region have start to slow nearby physical activity, which is shown through an almost absence of origin pressure. Ultimately, this results in all challenges below $1700 to end in failure as the market
fails to attract a sustained seller amid ongoing strength in sep21 and nov21 structure and a light undercurrent of Roaster buying sub $1690.Technically the market is nearing overbought territory but upside trend strength remains intact holding longer term longs into the positions.
The New York coffee “C” market closed lower Thursday as the forecasted cold weather did not cause any known damage. The market was supported early by early reports indicating that in some areas, the temperatures fell to frost levels. However, as the session progressed no damage to the main coffee producing zones was reported. According with weather services, a few areas may have seen surprising below frost level
temperatures. The frost threat will be diminishing as temperatures will be gradually warming over the next days. The most active contract for September delivery, settled 335 points lower at 156.40 cents a pound.
Volume was moderate with a total of 59,247 contracts, including 17,943 switches traded. A weak real continued to add the bearish sentiment. The dollar/ real exceeded the R5.00 on renovated concerns over the
covid-19 pandemic in Latin America. Arabica certs decreased by 17,831 bags to 2,171,324 bags. Pending 35,449. Grading today 3,650, passed 1,000, failed 2,650.
Another structure dominated session as both Sep21 and Nov21 based spreads narrowed into premium through a layer of commercial short rolling supporting values. The CSO market continues to add fuel to this fire
with 1,500 nov21/jan21 $40 premium/ $20 discount fence to the call trading at $7, as the commercial sector are happy to pay premium to protect against squeeze potential later in the year. This naturally draws ongoing
support into outright prices in London, which is not replicated in Arabica reflective in the arbitrage weakening to 79 cents versus Sep21/Sep21.Technically Robusta is moving into overbought territory whilst hugging the
upper Bollinger band averages. However, upside trend strength remains firm which for now holds longs into the move above $1700.
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