INTL FCStone Daily Coffee Report

Arabica coffee futures dropped sharply as weather improves in Brazil. The most active contract for March delivery fell 2.8% or 4.20 cents to 145.95 cents a pound.  Volume reached 47,075 lots including 12,089 switches. In options, activity was mostly on the nearby March contract in the close-to-the-money strikes. Volatility continued to diminish. The action was influenced by the London market, as Robusta prices were pressured with producer selling expected to resume at the end of the Tet holiday. The technical weakness in the chart added bearishness to the market. The breakage of the 20, 50, and 200 day moving averages accelerated the movement, posting five consecutive negative hours towards the close. In related news, the IHCAFE Honduras, reported January exports totaled 821,669 60-kg bags, up 41.6% from the same month last year. Accumulative exports for the first four month of the season to 1,410,667 60-kg bags, showing an increase of 40.6% from the same period last year.
 
London Market- London completely erodes previous gains above $2200 as the speculative community reverse nearby long exposure, amid a back drop of returning Asian pressure and a lack of official news relating to Brazil approving Robusta imports.
 
Values opened at unchanged and initially attempted to hold above the previous day’s settlement. However, through the early exchanges Vietnamese offers resting $10 above became very visual around the market and with no official news surrounding the Brazilian import situation the spec community started to liquidate. With limited commercial support in place values set back swiftly, unlocking stops first through $2235 and then $2200, at which stage volume accelerated aided by delta hedge selling generated from the 4,775 lots open in march17 $2200 calls and 4,050 lots open in march17 $2150 calls.  Given the bulk of the non commercials long position rests in March17, the liquidation seen through the session weighed on all March17 based structure with h/k weakening to $18 discount on over 5,000 lots.