Coffee Commentary -FC STONE- for July 7th

Coffee futures recover from sharp downside move

 

Ice Coffee futures closed 70 points lower this Monday in an interesting session marked by wide ranges and good volatility. September futures closed at 171.50 reaching a high of 172.80 and a low of 166.10 with a good volume of 21,931 lots. Throughout the morning session speculative long liquidation drove the market lower creating momentum to break the 170 convincingly and look towards the 165 mark. Roaster activity however was to then drive the market back up to close almost unchanged with the 165 area proving to be an important support level.

 The ICE Coffee COT report showed managed money longs had reduced their position by 278 lots while managed money shorts had increased exposure by 664 lots. The managed money player is now net long 38,760 lots as of Tuesday 1st. Given that today’s activity could have been driven in part by further long liquidation, next week’s COT report could show further depletion in that number.

 The world cup game between Brazil and Germany tomorrow could result in lower market activity tomorrow.  

 

 london - London was very slow to get started with the board focused on structure as the market adjusted to the forward premiums and accessed the developments in the spot month. Grading has slowed. Arbitrage has attracted another phase of short sellers as the differential broke below the 80 cent premium levels which generated a consistent wave of buying into London. Origin began to build above the market to create a blanket of selling which the market worked towards. Updated COT numbers in London showed the Funds carrying a net long of 26,647 and the Other Reportable players holding a net long of 4,651, against the processors short of 33,986.The interesting change was that the Managed Money players added 2,936 lots to the net exposure but the Other Reportable long recorded a reduction of 2,365 lots suggesting a switch of positions between groups! 

Prices began to lose traction into the second part of the session encouraged by a weaker turn in New York. The open position in July was still relatively large coming into today’s session with 3,608 lots open down 386 lots during a very slow session on Friday. Buying materialised into the lower London as arbitrage players added aggressively with the September premium down to 74 cents into the afternoon. Price action struggled to hold the upside momentum with the 2025 level being the downside trigger for the balance of the week.