After taking out yesterday's high in inactive trading, New York coffee trended lower rest of the session, bottoming out one-quarter hour before the close, nearly five cents from the high - the lowest close in the Mar17 contract since October 7th. Similar action in London, which opened above yesterday's high, but we did not trade below yesterday's low (we settled nine dollars above it). I wouldn't term the action as a Dark Cloud Cover as it comes near the bottom of the market's move, but it is negative action nonetheless.
March New York (KCEH7) settled just over one-half cent from its low, down 3.60¢. Volume was average at an estimated 32,560 lots including an estimated 984 EFP's, 10 EFS's, 310 TAS and 11,339 spreads. 4,175 calls and 3,653 puts also traded. The KCEH7-LRCH7 arbitrage: 61.07¢. Ratio: 1.6182. €: $1.0643+0.3%. BRL: 3.3943/$-¼. CRB: -1.8%. Crude oil: -2.9%. S&P500:+0.4%. Open interest: 186,145-812 (50-day stochastic: 14%; 125-day: 35%).
January London (LRCF7) settled four dollars from its low, down thirty-two dollars. Volume was below average at an estimated 14,613 lots including 3,515 spreads and 597 EFP's and 2,500 May17 EFS's. 1,350 calls and 1,590 puts also traded. Open interest: 106,896+782 (50-day stochastic: 23%; 125-day: 29%).
CFTC reports that Large Hedgers were net buyers of 2,577 lots of Coffee "C" in the week ending November 22nd cutting their net short position to 96,001 lots. Large Speculators sold 2,477 lots, reducing their long position to 49,076 lots. Index Traders sold 383 lots leaving them long 41,145 lots. Non-reportable Traders bought 283 lots and are now long 5,780.
ICE Europe reports that Other Reportable traders were net sellers of 1,982 lots of robusta coffee in the week ending November 22nd cutting their net long position to 1,152 lots. Managed Money bought 1,968 lots increasing their net long position to 31,818 lots. Commercial traders bought 1,030 lots, cutting their shorts to 28,386 lots. Swap Dealers sold 1,022 lots, increasing their short position to 7,636 lots. Non-reportable Traders bought seven lots leaving them long 3,052.
Stevedores and other port workers at the majority of Brazilian ports have planned a 24-hour strike starting tomorrow at 7 am local time to protest changes to Brazilian port regulations and pension programs. Santos workers will decide later on today whether or not to participate.
Early relative strength in coffee paralleled that of several other commodities as KC, RC, SB, SB and others moved in a similar pattern during early European hours. Judging by volume and volatility alike, the 8am EST hour seemed to turn on American based systems, and the recent day’s liquidation continued. The best volume of the day traded on the move to the low just before 9am, where a substantial iceberg buyer supported Arabica. Perhaps coincidentally, the largest option trade of the day went up around the same time, as paper sold 1000 H 165 / 155 PS delta neutral at 630. Commercials seemed quiet overall from our vantage, with spotty roaster buying appearing during the day with little from a well-sold Brazil. Central America is by and large sidelined, taking what many there are terming a wait and see approach. More postings of nearby shipments out of Honduras for exchange delivery are spoken of, and with little else on the immediate horizon, one imagines this topic will be closely watched as we approach end of year. 1000+ lots of November Robusta OI remain as only 1 lot of volume traded and two days left until contract expiration.
The N.Y. COT report showed non-commercials to be net long 49,076 a/o 11/22 , longer than market expectations.
Coffee prices are trading with little change, the March contract at 154.90 -50, high 156.90, and low 154.75. US dollar unchanged and crude oil up 37 cents at $46.44 per barrel. From Brazil, Safras & Mercado reported that as Nov 23, 68 % of the 2016-17 crop has been sold. Sales are more advanced than last year that accumulated 56% of sales at the same date. The technical weakness could trigger more sales if recent lows are broken. Last week COT will be released today after 3:30 pm, EST.
Arabica Coffee Futures for March delivery fell 415 points to 157.70 cents per pound as speculative liquidations and origin selling pressured prices to oversold conditions. Weakness in the Brazilian real, falling 1% to USDBRL3.38 promoted origin selling, pushing prices below the 50 day moving average of 157.15. Open interest continues to drop, falling 1,201 lots yesterday, reflecting the liquidation. Participants now look at support levels closely as prices enter oversold conditions in mid-term technical indicators, with an objective of 155.40, the 100-day moving average. Deliveries increased yesterday, with 218 notices delivered yesterday, bringing the total to 287 lots.
ICE Futures US will be closed on Thursday on observance of Thanksgiving. The ‘C’ contract will close early on Friday, at 1:00 pm EST.
London Market- Flat price values tracked lower amid continued weakness in nearby structure.
Though prices lifted $6 off the opening bell, a failure to test $2100 prevented the emergence of fresh longs as volume remained subdued. Focus instead turned to the Jan/March switch, narrowing to +$1 as spec long positons continued to unwind into the hands of the commercial short. Outright price action was a reflection of the structural weakness for the remainder of the session, breaking through the 50 day moving average at $2084, before printing new lows for the week. Good volumes of roaster buying were present throughout, running into spec shorts with New York also operating under pressure.
Options generated significant turnover throughout, with 1000 lots of the Jan 1900/1800 put spread purchased at $10 with an 11 delta hedge at $2044. An additional 1000 lots of the May 2300/2500 call spread were bought at $30, with participants seeking cheaper upside protection as the futures market traded under pressure.
Arabica coffee futures settled lower Tuesday on slow session. The most active contract for March delivery closed 145 points lower at 161.85 cents a pound. Activity was modest reflecting the Holidays and the beginning of the December delivery period. Up to date there has been 69 delivery notices. Volume reached 22,825 lots, including 4,504 switches. Commercial activity was noted as some origin selling took advantage of the positive opening. Speculative liquidation affected the soft complex. Sugar fell 3.0 % under 20.0 cents. Concerns of growing supplies encouraged the spec liquidation. The release of the USDA FAS coffee estimates last night, did not cause any particular effect on the coffee prices today, and analyst considered it was already factored. Other markets were quiet ahead of the release of the November FED minutes tomorrow. The CFTC COT report will be published on Monday instead of Friday due to the holidays.
London Market- Values lifted $18 off the opening bell as a result of a final hour resurgence in New York yesterday evening. A temporary breach of the psychological $2100 barrier failed to attract sufficient intraday longs for further upward traction, with volume hard to come by. Roaster buying remained operational throughout the day, limiting potential for movements lower, as January tested and bounced back above the 50 day moving average at $2082. A similar lack of direction in New York rendered the rest of the session to play out in a lethargic fashion, with the market content to breathe following recent volatility. May observed at 2500 lot EFS, which most participants observed as forward financing.
Options turnover simmered with 650 lots of Jan 2050 puts purchased at $52 with a 40% delta at $2092.
The news of the day in the coffee market was the announcement from ABICS director of international relations abandoning the plan to repatriate Robusta stored in other countries due to the process taking too long to enact. Bringing the beans back to Brazil would have required a pest-risk analyses and a change in the law. The effect on the market was initially felt in the Jan/March spread which had been trading at $8 under 2 weeks ago and closed on Friday at $36 over. With the announcement the spread quickly came under pressure changing hands 3,569 times on the day in a range of +29 to +1 ultimately falling $28 to settle the day at an $8 premium. The flat price had a delayed reaction, but followed suit, falling $101 at the day’s low (2051 basis Jan), as spec longs liquidated which encouraged industry to step in on the price break to a one week low. New York was initially pressured by the arb and traded to a 4 week low of 15950, yet being less affected by the Robusta news found willing buyers encouraged by a 1% strengthening in the real ($/r 3.35) largely courtesy of a broad based rally in the commodity complex. A spurt of buying brought a spark of life to New York during the final 10 minutes of trading taking prices from 16135 to 16410 and settling at 16330 for a net gain of 120 points on the day. Industry participated in adding cover on both sides of the pond while trade and specs were the notable sellers.
Arabica coffee futures ended lower Friday affected by a weak technical performance. The nearby December contract settled 145 points lower at 157.85 cents a pound, while the most active March contract settled 85 points lower at 162.10 cents. Volume reached 35,843 lots including 9,047 lots. The nearby switch widened to -4.25 cents due to last minute selling ahead of the first notice day Monday. There were reports that the Brazilian government was discussing the easing of regulations to allow the import of Robusta to reduce the Conilon insufficiency in the domestic market. Today, the soluble industry, ABIC, ruled out the re-import of coffee in Brazil in the short term, due to a phytosanitary prerequisite from the Agriculture Ministry, which could take several months. During the week, coffee prices fell 1.60 cents or 1.0 %. A strong US dollar encouraged producers selling, and the off-set of position ahead of FND contributed to add weight on the prices. The coffee market will be closed next Thursday, and will close early at 1:00 pm on Friday.
London Market-Another subdued flat price session, as participants observe widening premiums developing through the first quarter of 2017. Jan17/Mar17 traded out to $36 premium on 2,691 lots as momentum alone in the premium attracts fresh speculative/ system longs. There were zero tenders registered today. The total this month stands at 42 lots of originals, of which 23 lots are Conillon. Reports overnight suggested the Brazilian Government would consider the re importation of Conillon aiding internal roasting commitments. A situation which will be watched closely, but by no means neutralises the short fall. Technically whilst the market continues to hold above near term average and stochastics continue to face higher, some of the shorter term longs will be airing concern against the slowing upside trend strength. We would expect a change in sentiment should the market test below $2143 basis Jan17.
KC continues under pressure as a 2nd day of lower lows and lower highs were posted on relatively modest outright volume. The active March contract featured less than 10,000 lots of outright volume, while the Z/H structure traded in a volatile 75 point band as positions are squared ahead of first notice day. While one would struggle to call the performance good, the uptrend line connecting the Oct 17 and Nov 14 lows was held on today’s floor. Meanwhile robusta continues to hold in amidst a lack of motivated spec sellers and small hedge flow, and F/H settling at a 31 premium. With rumors continuing to spread with respect to reimportation of conilon to Brazil there is a again a hot coffee story with plenty of intrigue, though few independently verifiable facts. Expectations of a December fed action are near universal, while the pricing of multiple 2017 hikes has doubled since the US election. Janet Yellen did little to temper expectations, providing a dollar boost as it continues to trade above the key 100 level, and the S&P again approaches all-time highs. The BRL has done well in shaking off the volatility as the BCB continues to intervene while additional positive expectations are set by domestic economists.
Arabica coffee futures closed lower as speculative liquidation continues. The benchmark position for December delivery settled 55 points lower at 161.25 cents a pound while the most active for March delivery closed 90 points lower at 164.40 cents a pound. The nearby switch, December-March, still attracting good interest generated the most of the volume. A reversal of this structure surprised short players. A reduction of the open interest evidenced the recent speculative liquidation. The OI decreased 2,667 lots yesterday to 204,830 lots, and it has decreased 23,213 lots since November 7, when the December position posted the highs of 175.65 cents. In options activity, high volume was noted below the 150 strikes January basis, with 800 lots of the 150 puts and 1545 of the 145 puts traded today.
London Market- London maintained its recent upward trajectory, though lacked the volatility which has been a feature of recent sessions.
Though scattered origin selling remained, particularly through the early stages of the session, a failure to attract fresh shorts prevented any sustained tests lower. With New York remaining under pressure, arbitrage players maintained their recent activity with values ticking higher for the remainder of the session. A break above the 20 day moving average at $2146 saw additional longs enter the market which offers encouragement for further moves higher. The Jan/March spread continued to operate under volatility, trading an $18 range across the day.
The desire for additional downside coverage generated options turnover, with 2000 lots of the May 1950 put purchased, financed through selling 100 lots of the March 2150 put.
New York coffee rallied three-and-one-half cents to a three-day high in the first half of the session then fell nearly 5¼¢ over the next two-and-one-half hours. We spent the rest of the day in a two-cent range off the low, near the middle of which we closed. Brazil was closed for Republic Proclamation Day. 69% of the day's volume was in switches ahead of first notice day for Dec16, November 21,
January London traded steadily higher throughout the session, closing at its highest level since November 7th - the life-of-contract high close of $2194.
March New York (KCEH7) settled one-and-one half cents from its low, 3.70 cents from its high, down fifteen points on the day. Volume was average at an estimated 41,600 lots including an estimated 1,014 EFP's, 412 EFS's, 866 TAS and 14,364 spreads. 2,676 calls and 2,879 puts also traded. The KCEZ6-LRCF7 arbitrage: 65.09¢. Ratio: 1.6718. €: $1.0725-0.1%. BRL: 3.4381/$-0.2%. CRB: +1½%. Crude oil: +4.7%. S&P500:+0.6%. Open interest: 207,497-4,186 (50-day stochastic: 60%; 125-day: 68%).
January London (LRCF7) settled seven dollars from its high, up thirty-seven dollars. Volume was average at an estimated 18,843 lots including 4,757 spreads and 658 EFP's. 2,525 calls and 1,100 puts also traded . Open interest: 102,134-1,826 (50-day stochastic: 8%; 125-day: 13%).
CFTC reports that large speculators were net buyers of 3,043 lots of Coffee "C" in the week ending November 8th leaving them long a record 58,960 lots. ICE Europe reports that managed money was a net seller of 4,543 lots over the same period cutting their net long position to 32,927 lots. See datasheet for other details.
Coffee stocks in the European ports of Antwerp, Bremen, Hamburg, Genoa, Le Havre and Trieste fell 1¼% in September to 707,779 tonnes the European Coffee Federation estimates. Stocks in Genoa rose 2.95%. Stocks in the others fell by 1¼% to 3.88%. Stocks in Bremen have not been updated since August 2015.
The Green Coffee Association estimates that U.S. warehouse stocks of coffee beans totaled 6,207,005 bags at the end of October, up 7,982 bags during the month. This is 4.35% higher than the 5,948,228 bags that were in store one year earlier. Over the 1985 to 2015 period, stocks fell by an average of 177,210 bags during October, the third biggest month for declines.
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