INTL FCStone Daily Coffee Report for July 17/17

Arabica coffee futures extended gains today helped by the technical action. The most active contract for September delivery settled 250 points higher at 133.70 cents a pound.  The breaking of yesterday highs triggered technical buying as prices exceeded the June’s area of resistance. Volume reached 42,534 lots, including 7,844 switches. A weak dollar supported the commodity complex. The dollar fell following the US inflation data. The EURUSD was firm as the ECB plans to reduce the monetary stimulus. Oil prices climbed to tally 5.2 % for the week. The Bloomberg commodity index up 0.9% to 82.78. Firm real discouraged coffee sales in the local Brazil market. During the week, Arabica coffee prices recovered 3.6% or 465 points, totaling gains of 16.30 cents since June 22. The temperatures in Brazil are expected to be cooler across Sao Paulo and Parana early next week, dropping to mid to upper 30s in some spots. Frost is not currently expected, CROPCAST.  In Medellin, the First Coffee Producers Forum ended. The producers countries decided to create an action plan to improve the economics sustainability of the sector.  Different actions will be taken to have a better understanding of costs and coffee prices in NY and London exchanges.   The forum was attended by more than 1,200 delegates. On Monday the GCA will publish the US green coffee stocks at the end of June.  Last year, the stocks registered an increase of 126,000 bags and the 5-year average is of an increase of 168,000 bags.
 
London observed a holding pattern through much of the session, content to play the role as the secondary market to New York. Further moves higher were limited by the arbitrage as the Sep/Sep widened to 36 cents as the ‘C’ contract moved up, buoyed by U.S Dollar weakness and further speculative short covering. Scatterings of Asian selling were observed once more towards the top end of the daily range as values failed to test the nearby high at $2177 which remains as the short-term target as we head into a new week. Overnight open interest fell by 2315 lots, largely a result of 3212 lots tendered yesterday in the July delivery month. Open interest in the front month now stands at 1665 lots. Aside from the nearby highs, many participants will look towards the option exposure resting above the board if the market is to progress higher next week. With 5900 lots and 4000 lots of call exposure at strikes of 2200 and 2250 respectively many expect these to be influential if outright values can break higher over the coming sessions.