Coffee Commentary for Feb.13th

ICE Coffee Futures Close Lower

Arabica coffee futures closed lower Friday on speculative selling . The nearby contract for March delivery settled 135 points lower at 163.20 cents a pound while the back months declined 95 points, reflecting the widened of the nearby switch . The March-May switch widened 45 points to end at -3.30 cents. Usually, the March-May switch trades up to -3.20 cents before the delivery period. Volume was 48,336 lots, including 18,767 switches. Commodity and equity markets advanced slowly today as some traders closed books ahead of the long weekend. Markets in USA will be closed Monday in observance of the President’s Day Holiday. During the week, coffee prices declined 3.65 cents or 2.2 percent. The weather in brazil remained as the main factor influencing the specs action. The real devaluated 1.9 percent, to end at BRL2.8347 from BRL2.7819 it settled last Friday. The deterioration of the economic situation continued to cause the bearish sentiment.
London Market - London got off to an early start with the market rallying $15 in the opening minutes prompted in part by arbitrage related covering and spec buying on the back of New York’s ability to sustain itself above 165.00 basis K15. The surge in price was met by hedge selling from Vietnam which relieved some pressure off the H/K, trading up to -27 in the morning session as a result of the decline in paper long open interest in H15. Outright volume was slightly improved consisting about 30% of the volume in May with Vietnam eager to scale-up sell above $2020 basis K15.Technically speaking London’s close above the upper Bollinger band provides a positive continuation signal which the market may look to build on in the coming week. Monday’s session will almost certainly see lower volumes in the absence of the States coupled with Tet and Carnival. The 2000 to 2150 strikes carry almost 13,000 lots of Calls open now against 5,350 lots of Puts of which the main focus is the 2000 strike with 4,245 open. We could have seen a correlation of interest coming into London after the March option went off the board last Wednesday in the States. This has been an important draw to move London higher this week changing the technical configuration quite significantly.