Coffee commentary for August 12th

ICE Coffee Futures Consolidate Lower

Arabica coffee futures settled lower Tuesday on profit taking.  The most active contract for September delivery closed 455 points lower at 184.60 cents. Activity again was boosted spreads trading.  Volume reached 44,199 lots , including 17,288 switches.  The speculative action followed a report from Brazil stating  the progress of the harvest. According with Safras and Mercado,  Brazil has harvested 41.9 million 60 kilo bags  so far,  or the equivalent to 86% of their  forecasted crop.  The coffee harvested  would already   exceeds the recent estimate  of under 40.0 million published  by CONAB on July 25th. Weakness of the real added  heaviness on the prices. 

London - Volume was much quieter as the board attempted to gather upside momentum after the lead provided by New York yesterday. The September structure narrowed during the opening sequence into a mixture of rolling which included origin fixing interest being pushed down the board. Overnight longs followed the downside reaction as the market found level around the 1980 pivot area in November. Vietnam physical differentials have recorded little change in recent days showing at a decent discount to the board. Despite the good late shipments in July origin stocks appear still large. Demand remains extremely low as we approach mid-month with the bulk of the holiday season behind us now. Carryover stocks into the coming season look to be good with the forthcoming crop expecting good numbers in excess of 28 million bags so the market expects to be able to deal with good demand into the last quarter of the year. This makes for an interesting scenario building for the next six months.

Robusta lost traction into the afternoon as prices slipped back to the 1950 trigger area in September with the spot month discount widening with the action. Turnover was slow into the weakness but the key was the fact that the board could not attract new interest into the rally!