INTL FCStone Daily Coffee Report

Arabica Coffee futures for May delivery fell 3.52% on Monday, following Fridays tumble. Prices began the session lower, losing 1.25 cents within the first hour of trading. With limited volume, prices consolidated near the lows, hit lower by consecutive waves of selling, breaking nearby support of 144.00 basis May. Volume reached 31,255 lots, including 4,488 switches. Open interest increased 1,812 lots, suggesting additional shorts entering the market during. Spread activity was noted in the options realm, specifically in the 145, 155, and 165 strike range. Some traders sold anticipating Brazilian selling coming after Carnival. The soft commodity complex saw losses, adding to the bearish sentiment, with sugar losing 3.33 percent and cocoa losing 0.6%.
 
London maintained its recent downward trajectory amid weakness in the nearby structure, as front month management gathered pace ahead of Wednesday’s first notice day. The March/May spread operated under immediate pressure throughout much of the morning, a theme which continued through the session as values weakened to $37 discount trading 6000 lots. Flat prices moved aggressively lower in response, firstly driving through the 2017 low at $2116 before breaching the psychological $2100 barrier. Around these levels, roaster buying emerged in good volumes, halting the negative price action in London despite the ‘C’ contract continuing to unfold lower. For much of the rest of the session, values held around $2100 with industry buyers content to soak up the pressure. Additional support emerged through the May/May arbitrage as values narrowed under 47 cents. Further good volumes were generated via the options market, with heavy participation in the Sep 2500/1900 fence the main feature. A further 500 lots of the May 2100/2000 put spread traded at $44 as participants sought additional downside cover.