Arabica futures caved 445 points, closing 118.95, the lowest price basis KCZ in 6 trading sessions. Early returns were muted if positive, and prices took one last look higher, peaking at 125.75 at 9:16 edt, moments before the selling arrived. Less than an hour later aggressive selling had sent futures tumbling to an off-the-moment low at 119.55, a 620 point loss in less than an hour, before recovering back above 122. No further upside would be gained however as the 118.40 low traded going into settlement, finally settling at 118.95. The balance of the day kept the market within a 100 point range with last print only .45 points higher. Spread volume came in shy of yesterday but was still prominent at 32,437, on the last day before the Index roll begins. U/Z traded 15,766 times with it tightening 30 pts from yesterday’s high before backing off with the rest of the market, settling down 10 pts at -1.95. Certs continued to fall, losing another 20,797 bags (Antwerp) with US Stocks remaining unchanged and no new pendings. Robusta followed suit with KC losing $9 at 1353 with U/X falling $2, settling at +15 as it still remains in backwardation.
An absolutely massive day in coffee trading in all senses except for settlement as the active KCZ closed 123.40, -.05 and the prompt KCU 50 points stronger at 121.55. Dec futures traded in a 655 point range that felt larger, capped on the 61.8% retracement of the 1 year range basis KCZ. What had been a steady climb through the day, consistently taking out chunks of Brazilian and other selling dramatically reversed course just after 11am, trading the entirety of the range over the follow hour with scarcely a moment of recovery. Aggregate futures volume was 101,574, or 106k+ including EFPs and EFSs, the largest going back to February 11th and the 30th largest on record. Spread totals were also large, totaling 43,554, as was outright trading in the 2 most active contracts, both of which came in at their heaviest since we began tracking these in late March. Spreads were on the move again as U/Z rallied 55 points to -1.85 and Z/Z gained 20 to -4.40 even as Z/H backed out 2 ticks to -2.00. While reports of Brazilian coffee trading at tenderable levels (in both markets) continue to flow in, the structure seems to be discounting the likelihood of it being a lasting remedy. Certs fell another 14,603 bags overnight with no new pendings, and much of the conversation was around the likelihood of the coffee reappearing as future regrades. Late July pass rates appeared to be declining from the YTD average, however the publication of the months grading summary suggested that appeals were mostly successful for an effective 79.53%, with color failures being the bulk of the issue. Robusta fell similarly off its perch, closing 1379 -25 basis U, $87 off the intraday high and only $3 off the low. Spreads remained in backwardation, yet U/X lost $1 to close +17 after peaking $30 higher midday. The U/U arb closed at a recent high of 59c.
Arabica posted another standout day, rising 295 points to 123.45 in the active December contract. While OI has flipped to the 2nd contract ahead of Friday’s index roll commencement, outright volume remains nearly 3x in the front KCU, reflecting the remaining cleanup that needs to be managed nearby. The 123.25 / 123.70 gap basis KC2 was nearly closed, with today’s high of 123.60 leaving 2 ticks to be retraced. Combined oscillators, while still extremely overbought, backed off slightly from their max reading, and on the KC2 or KCZ chart coffee now has a 10th consecutive day of higher highs, higher lows, with only 3 negative final prints mixed in. Settle to settle from the night prior to the break out futures have gained 1995 points over those 2 full trading weeks. Spreads were the story again, as U/Z gained 20 points to close -2.40, while Z/H and H/K weakened 10 and 5 respectively. The Z/Z settled 60 points stronger at -4.60. Certs fell a precipitous 49,949 bags, the largest 1 day draw since Feb 17, 2012 and the 13th largest going back to 1995. Two day cert draws for August are nearly equal to the entirety of July’s reductions. If these remain out of the stock rather than being regraded it should help further the debate between cert relevance vs total balance sheet for the market in the coming days and weeks. Meanwhile, Robusta served as a catalyst for the day as U/X traded as high as +23 before closing +18, a second consecutive day of backwardation. Unlike yesterday both the spot and 2nd months gained, RCU closing 1404, +53 and RCX 1386, +36. The destiny of Brazilian coffee in both markets that has traded at tenderable equivalent to the exchange remains at a position of prominence in trader debates.
Arabica posted a mixed session, falling 105 points to 117.90 on roughly average volume for the recent rally. Prices gapped lower on the opening, a reaction to a number of factors – additional Brazilian hedging, the selloff in Robusta, the COT, and a strengthening DXY. While the KC COT short covering was expected to a large degree, another standout report in London helped urge prices lower and KC with them in sympathy. The 17,596 lots of short covering were a record, and 2 of the 3 largest managed money gross short covering events have now occurred in the past 2 weeks. Returning to Arabica, prices recovered some of their losses on roaster buying of the dip, yet by 7:30am EDT the market was down 330 points and it appeared the rally had been capped. The BRL fell roughly 2% before finding support, and KC spreads moved in opposition to recent trends with U/Z gaining a tick to -2.60 and Z0/Z1 backing out to -5.20, 60 points wider as Z/H closed -1.80, 25 points weaker, and H/K -90, down 15. Nonetheless a sustained intraday commodity bid and the tailwinds of last week’s chart breakout across daily, weekly, and monthly measures helped overcome to a large degree what was a laundry list of reliable headwinds, with futures even briefly going positive around 11:15am. While the day ultimately recorded a loss, with final prints even lower (116.70 last), it was not quite the clear rejection of the rally many had expected. Interestingly the active contract by OI is now KCZ as OI flipped the page by 20 lots. This is unusually early, 4 trading days before the index roll, and one wonders if it will revert briefly. Robusta closed up $7 at 1351, a fairly remarkable performance given the early weakness and stubborn adversity to higher prints throughout parts of KC’s intraday climb. It should be noted that while the prompt contract posted gains, the 2nd month X contract fell $11 to 1350 as U/X closed $1 in backwardation. This will be fascinating to watch as the potential delivery of conilons to the board faces off with what is otherwise believed to be a tight Robusta balance sheet.
Arabica posted a 3rd consecutive day of higher highs, closing 111.60, +1.95. Prices dipped on the opening, and similar to Monday, traded an intraday low for anyone unlucky enough to have MOO selling in. Positive reports on consumption trends by publicly traded companies helped boost sentiment, along with another new incremental low in the Dollar early on. The 10/100 moving average cross was a positive short term momentum indicator and trade, spec, and roaster buying was all noted at various points in the day. The ADX and aggregate trend models point higher as well, although the oscillators are heavily overbought, and Brazilian exporters report a sizeable uptick in producer selling interest. Most intriguing was post-settlement buying not only in flat price, though KCU did print the high with minutes left, but in structure where KCZ/H in particular exploded on good size volume (see today’s chart for 3 month visual context). 5 separate clips of 500+ volume were noted in the 2:3 spread during the day, and the last was most impressive. 700+ lots traded with 16 minutes left in the day as the spread ripped from -1.70 to an intraday high of -1.35. This followed another 800+ lot clip half an hour past the settlement marker, urging Z/H 10 points inward, and 450 lots in H/K at about the same time as H/K rallied to -.65. The high in H/K coincided with the final Z/H bid but did not see similar participation. The Z/H -2.00/-2.75 PS traded shortly after the final spike, 750x at a 30 premium, which may or may not have been coincidental. Certs were not a clue as pendings fell 2776 (2251 bags failed, 525 passed) and total stockpiles rose 450 bags, led by 275 Mexicans in Houston. London realized a similar trading day for nearly the entire session before the arb widened out over the final hour of trading. U/X closed unchanged at -14, and certs fell 130 tons. Tomorrow marks the commencement of the Rogers Index Roll.
Arabica posted Its first loss in three days, settling -0.75 to 109.65. On lighter volume than the past few days the market started off on a lower to sideways note before steady buying hit the screen at the 7:20am hour taking us to the highs of the day (111.35), a level we haven’t seen in close to three months. With that said, the market stalled shortly thereafter and retraced three cents before finding willing buyers, waiting for a pullback, that brought us right back to the 110.00 level into the final print. Weak sentiment in the structure continued with U/Z falling 5 points to -2.95 which also coincided with widest levels of the day (-2.95/-2.85). The DXY finally took a pause after sliding 4.50% the past 19 days while also forming a double bottom in the process (93.48/93.49). Certs were a non-event, losing 64 at 1,597,688 with pendings remaining unchanged (7451). Robusta settle lower for the second consecutive day, -$10 at 1336, as consolidation seems to be apparent after its 15% run higher earlier in the month.
Another strong day in Arabica, as the active contract closed above 110 for the first time since May 11, 110.40, +200. MOO selling sent prices 100 points lower against Friday’s settlement and that would be the low for the day. A perceived bearish COT report in London & the accompanying downticks ahead of New York’s opening, along with a reported increase in Brazilian selling over the weekend, spurred the opening losses however they would prove to be temporary. The Dollar, and later the BRL, drove renewed spec buying, as well as sparking accompanying debates about the stickiness of that particular catalyst going forward. The DXY fell to its lowest level since June 14, 2018 from which a bull flag had provided a launchpad for the following nearly 2 year strengthening. Outright volume was around average for the past 7 trading days, yet above normal spreading (the 2nd highest count since June 29th) boosted total volume over 50k lots. Basis the 2nd month continuation Arabica convincingly broke away from the 200dma (110.58) after trading within 1c of it on either side for the prior 4 trading days. A 9am drubbing was accompanied by spread weakness as KCU lost 100 points and U/Z backed 2 ticks off what was then its high points, however by end of day KCU had traded a recent high and U/Z closed unchanged at -2.90. Longer term structure remains divergent from the spot, as Z0/Z1 slipped a tick to -6.25. Arabica certs were unchanged as were pendings. Robusta’s near record short covering on revealed on the COT gave pause to traders Friday afternoon, yet worst case projections were not realized. Futures fell as low as 1332 in overnight trading (-26 vs Friday’s settlement) before closing 1346, -12. A continued fundamental friendliness from discretionary buyers, backed by the 810 ton cert draw (largest since July 1st) helped cushion losses along with pace trading to her sister market. U/X and X/F each closed -15, 2 and 1 ticks weaker respectively, as Conilon differentials reportedly weakened roughly a cent with Friday’s rally.
Arabica closed the week 108.40, +90, wiping out early weakness. The weak USD was a boon, and while KC has shifted into heavily overbought territory on the oscillators, aggressive selling has yet to appear. On a weekly basis prices appear to have made a convincing breakout, posting the highest weekly close since May 8th on both the KCU & KC2 charts. Volume was strong again, a second consecutive day of high turnover inside a relatively tight range for the size. U/Z again disappointed, weakening 10 points to -2.90, while the rest of the curve tightened, Z/Z in to -6.20. Robusta gained $8, closing the week 1358, the highest weekly settle on the continuation chart since January 3rd. Funds covered an astounding 15,584 gross shorts in London, the second largest 1 week change on record.
Arabica posted a remarkable session, gaining 660 points to close 108.35, its highest level basis KCU since May 19th. The 660 point rally was the largest since March 3rd. Futures extended yesterday’s macro aided gains from the open leaving sizeable rollover gaps on the continuation chart (75 points on KC1, 215 on KC2) as a fair adieu was bid to the N20 contract. Continued weakness in the DXY put a wind in New York’s sails, subdued business overnight In Brazil due to lower prices in local terms kept fresh hedge selling at bay, and sizeable buying around 6:30am NY time took out yesterday’s high (102.95). There was precious little backtracking on the day and as the trend turned positive, waves of spec short covering spurred prices ever higher. Long commercial / discretionary profit taking was noted as futures rose above the lower range trade targets, but would not be fairly termed aggressive. Although the managed money short at 59k lots is well below last October’s 94k+, it is only slightly below the late June 62.7 max for 2020, allowing ample opportunity for continued buying if the momentum can be sustained and macro factors remain positive. Nonetheless, aside from the final settlement price, action was quite similar to June 29th. Outright volume in the prompt came in at an estimated 23,222 today vs 24,203 on 6/29/20, total volume today 63,567 vs 66,118 that day, spreads were around a 1k lot difference, and the intraday VWAP change from the prior day was 487 points today vs 465 points on the 29th. While today was a convincing breakout from the recent term 95 / 105 range, that session saw a 22 day run of the active contract settling below $1 conclude. Coffee traded modestly higher for the following 3 days before pulling back to the midpoint of that day’s breakout as commercials grew in confidence with their selling and short covering faded. Whether a similar model is ahead from here remains to be seen. Certs fell 275 bags, drawn from NY, while pendings remained unchanged. Structure tightened in the front (U/Z -2.65, +0.10) and out the curve (Z/Z -6.50, +0.50). Robusta too benefitted, though to a lesser degree than yesterday, as futures rose $40 to 1357. Options in London again saw the largest trades, with the U 1100 P trading 2250x live. Spreads were mixed as U/X gained $2 to close -13, and X/F weakened 2 to -12. Robusta certs declined 13 lots net, with 18 new gradings (12 London, 6 Antwerp, all Conilon) pairing with 31 lots drawn.
Arabica gained 200 points, closing 101.75 as it vacillates inside the range going back to the end of June. The VWAP for the day was the same as Friday’s essentially erasing yesterday’s selloff, even if the settlements were about ½ a cent apart. Volume took a sizeable step backwards by every measure; outright estimated volume was roughly 2/3 of yesterday’s, total exchange volume was down 20k to 25,455, and spreads fell by over half. Prices were aided by the BRL which gained 3% to its strongest level (5.16+) since June 23rd. Heavy weakness in the DXY, which traded its second lowest level of the past year as Europe “agreed on an unprecedented stimulus package worth 750 billion euros ($860 billion) to pull their economies out of the worst recession in memory and tighten the financial bonds holding their 27 nations together” in the words of Bloomberg, along with optimism on a vaccine and payroll tax reforms were catalysts for the BRL as the FX busted through the 100dma. KC structure was mixed with U/Z a tick wider at -2.75 and Z/Z 25 points tighter at -7.00. Certs rose 4125 bags as 4950 passed grading out of 10,727. US stockpiles continues to wither, down another 825 bags out of NY to a total continent wide 93,767. Pendings are down to 2776. The Robusta market was similarly strong and suffered less volatility on its way to a $39 gain. Futures closed 1317, the highest level basis the Sept contract since March 25th, and on the 2nd month continuation since March 3rd. Total volume exceeded that of NY at 27,022, a rarity.
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