Coffee commentary for Jan.15th

ICE Coffee Futures Consolidate Lower



Arabica coffee futures consolidated lower Thursday at the end of a slow session. The most active contract for March delivery settled 320 points lower at 17665 cents a pound. Volume decreased to 26,412 lots including 6,741 switches. Trade at TAS decreased considerably to 355 lots, reflecting the end of the index fund re-balancing period. In Brazil, a late fall of the real contributed to add pressure on the coffee market. World markets were shocked today after the Swiss national bank abandoned the franc’s cap against the euro, causing a sharp drop of the euro. In weather news for Brazil, SOMAR forecast remained unchanged , with dry weather projected to end on January 24. Other meteorologists anticipated a shorter dry period.
GCA stocks for December decreased 169,190 to 5,524,964 60 –kilo bags.
London Market - London had a go at consolidating above the 2000 level basis H15 only to fail late in the session pressured by short-term specs taking profits ahead of the long weekend in the States. Despite prices hovering well above 2000 throughout the session, origin was hesitant to take action in expectation that the market could rally further on continued news of dryness from Brazil.
The London option market was particularly active today and some strikes were traded in good volume namely the 2050 Call which traded 1050 times and the 1950 put along with the 1800 put which traded 700 times each. Considering only 11,639 lots of volume in today’s session, a large chunk of the day’s activity was comprised of market makers looking to buy futures to hedge their deltas providing support to the market, together with arbitrageurs, who saw the weakness in New York as an opportunity to buy back London and take profits.
Grading in London continues to reflect Conillions coming forward to the board with another 202 lots approved today. The flow of Brazilian Robusta has added an important contribution to the performance of the structure as we move towards the January expiry. Rolling from the origin players also adds to structural pressure as we organise for the month change.