INTL FCStone Daily Coffee Report for August 02/17

Arabica coffee futures closed lower Tuesday after market failed to surpass the previous highs.  The most active contract for September delivery settled 140 points lower at 137.85 cents a pound.  Volume reached 35,475 lots including 6,224 switches. The active nearby Sep-Dec switch finished at -3.60 cents.  Activity began to be more significant with good buying interest under -3.75. The technical resistance against the 140-level stopped the recent rally. Speculative short-covering continued as showed by the open interest that as of yesterday decreased 2,663 lots to 215,119 lots, the lower level since June 20. In Brazil, the weather remained dry with temps in the 40s and 50s across the coffee belt. Truck drivers protesting a tax hike blocked roads to the main port of Santos. A weak dollar added support early in the morning, but bounced late. In the soft complex, the cocoa market reversed direction, closing sharply lower. Crude oil lost $1.00 to $49.26 per barrel.
 
Further long liquidation in the nearby structure combined with weakness in the ‘C’ contract saw values close lower in London for the fourth consecutive session. With commercial interest thin on both sides of the market, outright prices struggled to generate early momentum, content to hold around the near term averages at $2122 basis September. Short term long liquidation in New York following a failure to breach 140 dragged values in London lower, although once more remained supportive above $2100  which holds as nearby support. The Sep/Nov spread weakened further, trading into $5 premium through 3000 lots. The make-up of the structure will remain closely monitored by participants, having attracted the attention on the speculative community tracking momentum lower. Reasonable options volume traded with 500 lots of the Nov 2400/2000 fence trading at $25 with a 44% delta hedge at $2113.