INTL FCStone Daily Coffee Report

Arabica Coffee Futures for May delivery settled unchanged for the second consecutive day on Friday, at 139.30 cents per pound. Activity was dominated by the switch, with 8,577 switches traded and 29,913 outright lots. Prices traded in a relative tight range, following the pattern of the past few sessions. Levels began under pressure, edging higher throughout the session and even trading slightly above the 140.00 level (May), nevertheless, lack of follow-through prompted short term speculative liquidation, erasing most of the day’s gains towards the close. The Brazilian saw some volatility today, trading between USDBRL3.17 and 3.13, after unemployment figures matched consensus at 13.2% for February.
 
During the week, prices increased 1.7 cents, trading sideways on lack of fundamental news. Short term speculators dominated the trading, playing both buy and sell sides. COT figures showed the managed money sector flattening out their position to a mere 307 lots long, liquidating 8367 net longs, while commercials covered a net of 10,586 shorts to a net short position of 39,204 lots. During the month, prices traded in a 10.3 cent range, failing to break the intramonth high and posting new lows at 136.20 for the May contract. Overall prices decreased 3.3 cents, or 2.3%, as the participants await fundamental developments to give clear price direction.
 
With flat price action following a similar pattern to how much of the week unfolded, focus turned to the structure which accounted for the bulk of the session’s volume. Having tightened into $17 discount throughout the week, the May/July switch weakened to $23 discount through 2000 lots, as the spec long looked to roll down the board, further into the hands of the commercial short. Additional good volumes were present in the July/Sep spread, trading a $5 range whilst weakening to $10 discount. Outright price action lacked direction of its own accord, instead tracking New York with the May/May arbitrage continuing to hold above 40 cents. Good turnover was visible in the options arena, with 2000 lots of the May 1950 put trading at $3. Participants will closely observe the open interest surround these strikes heading into next week.
The March 2017 contract month went off the board with 79 lots re-tendered for the session. Total tenders for the month showed 4531 lots with 241 lots re-tendered.