INTL FCStone Daily Coffee Report

Arabica coffee futures rallied Monday as concerns over a possible deficit could continue for the next season. The contract with most of the activity gained 4.40 cents to 152.80 cents a pound. Volume reached 27,593 lots, including 3,058 switches. In options, significant volumes were traded on the December 160 and 170 calls, (750 and 825 lots, respectively). With ending inventories at low levels, Brazil will be dependent on the current crop to keep export commitments. Despite this is an "on "crop year, some weather problems have deteriorated the crop. The situation of the conilon is also worrying. Little of no rains in the Espiritu Santo areas, erode the outlook for the crop. In other factors, dollar weakness helped the commodity complex, as probability for a rate hike during the September FED meeting is only 12%. Participants will follow press releases closely looking for any indication for the December meeting. A constructive December chart in the coffee market attracted speculative buying. A strong bounce from 148 make the prices poise to test the recent highs at 155.70-157.75.
London Market- A fresh wave of fund buying into the commodity basket propelled the Robusta market to post new highs for the year.
A subdued morning was a continuation of last week’s limited flat price activity although the presence of fresh buying raised levels through the previous 2016 high at $1947. Further speculative activity followed as the States came online, eroding moderate origin selling which had been resting above the market, having been absent throughout the passive close to last week.
This week’s COT report showed a further 3952 lots added to the managed money net long as both fresh longs and short covering were present. The merchants’ net short increased a further 5574 lots to 42,222, as 12,997 new short positons were reflective of origin sellers becoming interest as the values continue to rise, outpacing fresh roaster fixations.
Further downside protection continued to trade, as 1000 Jan 1800 puts were bought at $24 with a 17% delta hedge at $1979.