Evening Coffee by Societe Generale

     After rallying one cent in the first ten minutes of active trading, but falling more than a cent short of yesterday's high, New York coffee sold off steadily over the next two-and-one-half hours pressured by continued U.S. dollar strength and on calls for rains in Brazil later on this week. We fell 3½¢ from the high, fueled by stops at 3-day lows then reversed direction, rallying all the way back, actually taking out the early high by one-quarter cent in the last twenty minutes.
    December New York (KCEZ6) settled near its high (91%), up ninety-five points. Volume was thirty-three percent below average at an estimated 26,362 lots including an estimated 867 EFP's, 31 EFS's, 242 TAS and 6,172 spreads. 3,095 calls and 2,514 puts also traded. The KCEZ6-LRCF6 arbitrage: 60.93¢+0.05¢. Ratio: 1.7312+0.009. €: $1.1140-0.4%. BRL: 3.2549/$-¾%. CRB: -0.9%. Crude oil: -1.2%. S&P500:-0.3%. Open interest: 163,896+230 (50-day stochastic: 2%; 125-day: 1%).
      The market has been stuck for the last four days in the range set on August 24th - 147.80¢ to 142.25¢ in the Dec16 contract. Look for movement in the same direction upon breaking either of these levels.
    November London (LRCX6) settled in its lower half (43%), down three dollars  Volume was thirty-seven percent above average at an estimated 20,918 lots including 7,260 spreads and 3,739 EFP's (1,699 Sep16, 2,040 Nov16). 275 calls and 665 puts also traded. Open interest: 112,302+2,335 (50-day stochastic: 89%; 125-day: 34%).
     ICE Europe reports that commercial traders were net buyers of 2,808 lots of Coffee "C" in the week ending August 23rd cutting their net short position to 27,665 lots. Managed money sold 1,701 lots reducing their net longs to 23,984. Swap dealers sold 804 lots (short 7,014). Other reportables sold 656 lots (long 8,350). Mon-reportables bought 353 lots (long 2,345).
     Two cold fronts will bring rains to southern and western Brazil over the next seven days. Parana and western São Paulo to get 20-50 mm through Monday. Extended forecasts point to rains continuing at least through first-half September. - Somar Meteorologia
John Bernardi