Arabica coffee futures extended the recent rally to reach the highest level since Feb 22. The benchmark contract for May delivery settled 7.90 cents higher at 190.50 cents a pound. Commercial short covering ahead of the delivery period for the May position and fund buying have found little or no selling to slow the rise. A very bullish technical outlook attracted funds and speculative buying. The Brazilian real and Colombian peso firmed as the dollar slid ahead of US inflation data Wednesday that could help gauge the FED's posture on interest rate policy. The real traded below the BRL 5.00 level for the first time since February 2nd, and the peso below COP 4,500 since January 27th. The soft commodities complex added support to the coffee. Raw sugar prices reached a 11-year peak and the cocoa an 2 ½ -year high. Certs stocks fell by 90 bags to 729,504 bags. Pending grading remains at 0.
Robusta Jul23 contract settled at $2323 +67 with a 2326/2250 range. A strong rally driven by May/Jul spread strength. The May/Jul was center stage today, seeing a 43/96 range on 8.5k lots. This has all the hallmarks of a ‘’short-squeeze’’. Industry shorts having to buy the front month spread into very little liquidity meant that they had no choice but to pay up. It seems someone may be gearing up to take delivery on the May23 23 contract; on this, it is worth reminding ourselves of the ICE rule change coming into effect on the Nov23 contract, a reduction on the stop limit from 7.5k lots to 3.5k lots. Outside of this, the Nov23 2500 call traded 1000x @ 82 and the May23/Jul23 100/70 fence (to the call) CSO traded 1000x @ 3. A soft US CPI inflation print tomorrow could be bullish commodities due to the higher probability of a FED pivot.
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