Coffee Commentary for Dec.8th

ICE Coffee Futures Fall to a 3 ½ Month Low

Arabica coffee futures fell Monday as speculative liquidation continued. The active contract for March delivery declined 205 points to settle at 178.05 cents a pound. Weather news encouraged the speculative selling. Forecast of rains with ample coverage for the next five to seven days for the main coffee growing areas in Brazil caused the action. Also , the devaluation of the real contributed to induce selling. The real fell to a nine-year low, after unexpected decline in China imports last month. The real ended at BRL 2.6010 or 0.5 percent lower.
London Market - London was still following the familiar trading pattern with the January structure making up the major part of the turnover as the discount edged out to $15 during the morning. Little change from the Vietnam situation as we move into the second half of December and prepare for the holidays. Friday recorded an increase in the open position by 2,094 lots with new interest down the board. The management of the spot positions continues to drive the weakening structure as players switch to roll more longs than they liquidate. This week’s COT showed the Hedge short being reduced by just over 3,000 lots to a net position of 33,924 with the Managed Money long down by 1,257 to 22,248. The Other Reportable long was almost halved down to 1,370. Swap traders carry a net long now of 7,435 lots confirming the movement of September 2015 exposure into finance last week. Arbitrage is interesting with the differential operating towards 85 cents bases March as the premium continues to narrow adding supporting in London and contributing to the liquidation pressure in New York. Spot month pressure continued to lead London lower as stops were triggered into the close as the market looks towards the 2000 base into the balance of the week.