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Arabica coffee futures appeared Friday to take a break after complete three weeks of steady rise. The contract with the most of the activity settled 70 points higher at 165.50 cents a pound. The volume reached 32,106 lots including 7,258 lots. In options, main activity focused on calls and puts close to the money nearby contracts. Commercial selling surged a little on weakness of the real. The currency declined to USDBRL3.2003, as corruption headlines tainted the economic outlook and investors’ confidence. The COT report published after the close showed the non-commercials adding 12,059 longs and they are holding now 51,090 net longs. At the same time commercials are holding a net short position of 94,410, adding 11,000. From Oct 18 to 25, the period of the COT report, the market gained 7.10 cents. Total open interest posted another record as of yesterday of 209,739 lots.
A final hour rally in London breached and settled above the weekly high at $2188 to close the week in positive fashion. Aside from the final hour, much of the rest of the session was fairly subdued, although consistent origin selling through the day acted as a cap on the market as values failed to drive through technical resistance early on. Any thoughts of a sustained test to the downside were quickly erased however when a technical dip uncovered Roaster buying, which acted as a solid platform for buyers to work off into the balance of the day. With November open interest falling to just 4,896 lots following yesterday’s EFPs, the Nov/Jan switch strengthened to $21 premium as remaining shorts scrambled to roll positions as Tuesday’s first notice day looms. Options remained active with 1160 lots of Jan 2050 call were rolled into the March 2150 strike, receiving $29 with 870 Jan futures bought at $2190 and 638 March’s sold at $2189.
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Arabica coffee futures extended gains Thursday as specs continued to add long positions. The most active contract for December delivery settled 110 points higher at 164.80 cents a pound. The volume reached 45,575 lots, including 10,454 switches. The March 200 calls continue to attract volume, with 1170 lots traded. The open interest for futures reached a record high on Oct 26, of 209,653, validating in certain way the recent price rally. Some volatility affected the market after the opening, but had the tendency to slow down by the end of the session. With rains in Brazil developing in favorable conditions, a tight domestic market appears to be the steam that is helping prices. According with some sources, current scenario for exports is tough. “Prices offered by international buyers don’t cover replacement cost “, they said. In London the Robusta market’s performance added the bullish sentiment. Concerns of possible defaults are causing the forward curve flatten out. In macroeconomic news, speculative participants will eye tomorrow’s US GDP data, expected to reach a growth of 2.5% quarter over quarter for movement in the dollar and the overall commodity complex.
London Market-London operated in sideways fashion as November book management provided much of the session’s activity. A failure to break above yesterday’s high at $2188 offered restbite to the recent resurgence to the upside despite origin pressure remaining limited. Support continued to be found through roaster buying, fixing in good volume with values holding firm at yesterday’s settlement. Attention turned to the Nov/Jan switch, which narrowed as far as level money with residual longs rolling as open interest dwindled. The bulk of the session’s volume was driven through EFPs, with the posting of 11500 lots representing the rolling of the certified stock holder into March. Technically the market remains firm with recent strength in New York supporting fresh London highs. The psychological $2200 remains the near term target higher, which could be signified by a breach of the double high at $2188. Arabica Coffee futures in the ICE Exchange settled slightly lower on Wednesday, after reaching new highs for the year. The active contract for December delivery settled 80 points lower at 163.70 cents per pound. Prices were firm from the opening, as the speculative community followed the upward momentum. Prices reached a high of 165.75 cents per pound for December, and consolidated lower during the last three hours of trading as long participants took profits and origin selling intensified. Weakness in the Brazilian real, losing 0.80% at USDBRL3.1384 at 5pm EST helped pressure the market lower. In options, over 1000 lots were traded in the May 180 Calls, and 600 lots in the May 210 Calls, suggesting large clips of upward protection.
London Market- Early strength off the opening bell was a response to additional final hour strength in New York last night, as values drove to levels last printed in October 2014. With price action once again tracking movements in the ‘C’ contract, a test of the session’s lows was a result of early corrective action in the Arabica contract. Resistance emerged at the intra-day double high at $2188 which now becomes a upside target as the market edges towards the psychological $2200 barrier. The Nov/Jan switch continued to attract turnover, narrowing $8 to -$17 as residual November longs were rolled ahead of Tuesday’s first notice day. A further 2607 lot reduction in Nov open interest reduced the total to 18733 lots, with around 13,500 lots of the certified stock holder expected to be rolled via an EFS. Options turnover was present, with 500 lots of the Jan 2400/2050 fence (to the put) bought at $10 with 210 January futures bought at $2183. Arabica Coffee futures extended recent gains to a seven month high by posting a 660 point increase and settling at 164.50 cents per pound for the active December delivery contract, prices not seen since February 2015 on strengthening of the Brazilian real amid a tight supply and demand scenario. Volume increased significantly to 62,491 lots, including 15,463 switches. Speculative buying got to work early in the session, as data showed lower Brazil exports and prices continued making new highs. The rally surprised short term trades, forcing them to cover short positions early on. Recent weather concerns in Brazilian and Vietnamese Robusta producing areas have maintained the market firm. Nevertheless, arbitrage values have widened nearly 8 cents in the past two days, suggesting Arabica is pulling Robusta higher. In addition, the strengthening of the Brazilian real (USDBRL 3.1110) has attracted additional speculative buying. In Brazil weather news, scattered showers have favored central and southern Sao Paulo and western Parana, and are expected to build throughout southern Minas Gerais, Sao Paulo, and Parana up until Saturday, which should replenish moisture and improve conditions for the flowering crop, according to Cropcast. In macroeconomic news, participants will eye the upcoming Brazil unemployment data on Thursday, followed by US GDP on Friday. In options activity, over 5000 March Calls traded between the 175 and 200 strikes, reflecting upward protection.
London Market- Upward momentum continued to build in London as aggressive technical buying in New York pulled values higher. Roaster buying once again provided support, albeit in light volumes, towards the bottom of the day’s range amid ongoing rains delaying harvest in Vietnam, as January breached what was the annual high at $2163. Both volume and upside momentum increased as the U.S emerged online, as London tracked significant upside traction in the ‘C’ contract. Flat price strength was reflected in the structure, with the Nov/Jan narrowing as far as $19 as November book management continued while the F/H narrowed to $6 with January contracts remaining in high demand. Though origin pressure remained absent, resistance was found through arbitrage players as the H/F widened 4 cents to 67.3 cents. Options activity simmered as participants searched for cheap downside protection with futures ticking higher, as 1000 Jan 2000 puts were bought at $25 with a 19% delta at $2178.
The Cooxupe cooperative now sees coffee shipments totaling as many as 4 million bags this year, Executive Director Lucio Dias said Tuesday. That’s down from an April outlook of as many as 4.5 million bags amid tighter domestic supplies (a bag weighs 60 kilograms, or 132 pounds). Arabica coffee for December delivery rose as much as 2.9 percent on ICE Futures U.S., and was at $1.623 a pound at 10:56 a.m. in New York. It’s headed for the sixth straight monthly gain, the longest such streak since 2005. Prices are drawing support from “continued concern" over longer-term supplies of arabica from Brazil and similar concerns over robusta beans, Johannesburg-based trader I. & M. Smith Ltd. said in a report. The coffee market has already seen demand exceeding consumption in the two years ended Sept. 30, according to the International Coffee Organization in London. Coffee has posted the fifth-best return so far this year among the raw materials tracked by Bloomberg Commodity Index. In Vietnam, the largest producer of robusta, output of that variety is projected to drop 20 percent, the Vietnam Coffee and Cocoa Association said Monday. In London, robusta for January delivery advanced reached $2,175, the highest since October 2014. The premium that arabica commands over its cheaper cousin jumped 5.3 percent to 63.02 cents, the highest level since Sept. 27. In Brazil, the nation’s robusta crop has been devastated by severe drought, prompting coffee-bean roasters to look for more arabica than usual. On top of that, Brazilians are likely to consume 3.2 percent more coffee in 2016, well above the typical growth rate of about 1 percent, Nathan Herszkowicz, head of industry group ABIC, said by phone. Cooxupe now expects to divert as many as 700,000 bags of coffee from the export market to the domestic market in 2016. "Export and internal prices are similar, but domestic sales yield a bigger net gain because of lower logistical costs," Dias said in an interview. A customs strike is affecting the issuance of certificates for export, Nelson Carvalhaes, president of Brazil coffee exporters group CeCafe, said earlier this month. Arabica coffee futures for December delivery gained 180 points to 157.90 cents a pound. The strengthened of the currency and the tightness of the supply from Brazil encouraged the speculative buying. The volume reached 26,500 lots, including 5,582 switches. In options, only volume on the March 147.50 puts with 500 lots traded. The real strengthened to the highest level since July 2015, trading at USDBRL3.1183. A more favorable scenario for investors with news and flows have contributed with the recovery of the Brazilian assets recently. In the coffee market, the Friday’s COT report showed non-commercial added 7,734 longs as of Oct 18, holding now a net long position of 39,040 lots. The open interest continued to increase , reaching 200,158 lots as of Oct 21, the highest level since last January.
London Market- The Robusta terminal continues operating in an upward trajectory as on- going rains delay the early Vietnam harvest, reducing commercial pressure. Nov16 open interest reduces overnight to 22,446 lots with certified stocks standing at 13,711 lots. Nov16 based structure generated 4,286 lots with a further 858 AA’s registered, we would expect exposure to be neutralised almost totally over the coming days via financing rolls in the form of EFS. Option volume fails to slow with buying 500 Jan17 $2000 calls selling 390 jan17 futures (78% delta) @ 2152 trade at $180 and buying 250 jan17 $2050 put selling 500 jan17 $1750 put buying 65 Jan17 future (26% delta) @ 2150 trade at $38. Technically Robusta’s move off the lows has been textbook of late and the recent action is giving no indication price action is on the wane. However, the fresh highs in London have not been support by similar fresh highs in New York and unless this rectifies itself quickly, it may become a cause for potential concern. Arabica coffee futures for December delivery finished 20 points lower at 156.10 cents a pound. The session was slow and driven by short term traders. Volume reached 29,619 lots, including 8,055 switches. The active December – March switch remained at -3.50 cents. Reports of rains covering the major growing areas of Brazil and a strong dollar put some pressure on the prices . The rains covered Parana , Sao Paulo and Minas areas. During the next week, a cold front is expected that will bring more intense rains over Minas Gerais and Espiritu Santo, SOMAR said. The dollar set new eight-month highs helped by the euro selloff and the FED rate hike anticipated for the end of the year. In Brazil the real declined to USDBRL3.1660. During the week, Arabica prices gained 75 points. Speculative buying pushed the prices to new high settlement at 158.80 on Tuesday. A strong dollar capped the rally , that encountered robust resistance against the 160 level. The open interest added 6,323 lots to 197,794 , the high level since June 2.
London ends the day $31 higher to post a $79 gain on the week, the largest since the beginning of the year. With the dollar firming overnight, pre-market sentiment was distinctly negative and the early action reflected that. A push into near term support around $2110 seemed to set the tone, although the board’s inability to generate fresh downside momentum meant roasters were happy to provide support scale down underneath $2100. Into the afternoon, the Nov/Jan switch began to attract attention, as it narrowed from -25 into -10 in the space of just one hour as spec short covering triggered buy stops ahead of first notice day at the end of this month. The structural strength prompted an upward swing to unfold in the outright as specs, who have been mostly operating out of a short book this week, began to cover en masse, ensuring that the market ended the session on the highs. Options remained active with 1500 lots of the Jan 2300 call being rolled into the May 2500 strike at $10 as the main event. Traders seemingly keen to maintain additional upside price protection for a little while yet. Arabica coffee futures for December delivery settled 195 points lower at 155.90 cents a pound. Rains developed on the main growing areas of Parana, Sao Paulo, y Minas Gerais and forecast of a more stable pattern of precipitations for next week, encouraged the speculative selling. The Espiritu Santo areas, main Conilon producer, remain dry. Volume reached 31,053 lots including 5,862 switches. The active December –March switch remained at -3.50 cents. Good volume was noted on the December 155 and 150 Puts. OI showed a large number of Puts (more than 22,000 contract ) from the 155 to the 130 strikes against the December position. The market action was also influenced by the technical picture. A well-defined resistance area at 160 could limit the advance in the short term. Oscillators slightly over-bought complement the picture for a corrective move.
London Market- London operated in subdued fashion with values hovering at the middle of the week’s trading range. Prices fell $20 through the first hour as technical participants anticipated overbought conditions, though support emerged at $2113 for a third consecutive session, aided by additional roaster buying present in lighter volumes. Open interest fell 6565 lots representing the neutralisation of futures positions following yesterday’s Nov16 option expiry. Turnover through the Nov/Jan switch was limited as values weakened to $27, with November open interest now standing at 26,438 lots, of which half is held by the certified stock holder. Options activity simmered, with 200 lots of the 2250/2000 fence (to the call) traded in Jan, March and May, with upside protection continuing to be sought down the board. Arabica coffee futures fell on Wednesday on slow dealings. The most active contract for December delivery lost 90 points to settle at 157.85 cents a pound. Weather report forecasting good rains for the main coffee growing areas of Brazil caused early speculative liquidations, however prices recovered after lack of follow through was noted. On Brazil weather news, the blocking pattern not allowing rains began to dissipate, allowing rainfall for the next 4-5 days, reported SOMAR. For the next week, heavy and more intense rains are expected, they added. Volume reached 25,261 lots including 4,296 switches. The active nearby switch widened 5 point to end at -3.50 cents. Good interest buying remains at -4.00 cents. On the options, activity continued on close to the money strikes for the December position, while a large clip fence on March 170 Call/ 155 Put was noticed. The real trading was slow as participants expect the COPON’s decision about the ZELIC rate tonight. The USDBRL reached 3.1688. Analysts are expecting a decrease of 25 to 50 base points. In addition, crude oil gained 2.25%, buoying emerging market currencies. In other macroeconomic news, the European Central Bank will announce their interest rate decision tomorrow morning.
London Market- London consolidated lower throughout the session, following two days of explosive movements higher. Additional buying propelled values $8 higher off the opening print, to the day’s high at $2161, where a double high now exists and which will act as a short term target to the upside. Origin selling remained absent with downside pressure provided through the liquidation of spec long positons. Roaster buying at the bottom end of the day’s range provided support, as prices bounced and firmed away from the session’s lows although in diminishing volume as the market moved back higher. November options expired today against a futures reference price of $2094, leading to 1,633 lots of open interest in the $2100 calls being abandoned. However, 16,995 lots were exercised between $1500 through $2050 call strikes, which should neutralised a large percentage of the Nov16 futures exposure to around 20,000 lots open. The Jan 2000/1900 put spread vs selling the 2400 call traded 1000 lots with a 28% delta, buying 280 Jan futures at $2136. An additional 500 Jan 2150 calls were purchased at $83 alongside a 44% delta at $2136 Supported by strength in the Brazilian currency, coffee futures in London and New York continued strongly higher on Tuesday, New York to its highest level in eighteen months, London to new life-of-contract highs (and a 2-year spot high). Buying was mostly speculative. Origin selling was spotty.
The London market is in overbought territory with a 9-day RSI of nearly 86%. December New York (KCEZ6) settled 75 points from its high, up 1.65¢. Volume was average at an estimated 31,365 lots including an estimated 873 EFP's, 18 EFS's, 335 TAS and 9,163 spreads. 4,507 calls and 5,011 puts also traded. The KCEZ6-LRCF7 arbitrage: 61.32¢. Ratio: 1.6279. €: $1.0978-0.2%. BRL: 3.1823/$+06%. CRB: +0.2%. Crude oil: +0.3%. S&P500:+0.7%. Open interest: 192,332+861 (50-day stochastic: 100%; 125-day: 84%). January London (LRCF7) settled near its high, up forty-four dollars. Volume was climactically heavy at an estimated 42,071 lots including 16,144 spreads and 516 EFP's. 7,447 calls and 6,871 puts also traded. Open interest: 127,620-4,507 (50-day stochastic: 85%; 125-day: 68%). The European Coffee Federation estimates that coffee stocks in Antwerp, Bremen, Hamburg, Genoa, Le Havre and Trieste fell 12,304 tonnes in August to 716,769 tonnes. This is down 3,570 tonnes from one year earlier. Bremen stocks have not been updated since August 2015. The Green Coffee Association reports that U.S. warehoused coffee stocks rose 913 bags in September to 6,199,023 bags. This is 81,915 bags higher than the 6,117,108 bags in store at the end of September 2015. Over the 1989 to 2015 period, stocks fell by an average of 101,744 bags in September. (see charts) ICE Europe reports that managed money was a net buyer of 1,901 10-tonne lots of robusta coffee in the week ending October 11th leaving them net long 33,728 lots. Swap dealers sold 906 lots (short 4,099). Non-reportable traders sold 626 lots (long 3,180). commercial traders sold 209 lots (short 40,873). Other reportables sold 159 lots (long 8,063). John Bernardi |
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