Coffee Commentary for Jan.6th 2015

ICE Coffee Futures Continue to Bounce on Weather Concerns

Arabica coffee futures closed firm Tuesday as irregular rains in Brazil encouraged buying. The most active contract for March delivery gained 6.80 cents a pound to close at 174.90 cents a pound. Futures prices during the last two sessions have increased 8.5 percent. Activity raised to 26,767 lots including 4,921 switches. The active March-May switch attracted good participation as some participants are anticipating volatility related to the re-balancing of the index funds and the roll. Traders may take advantage of the forward structure as the curve is practically flat after March 2016. On weather news, SOMAR reported heavy but localized rains in Southern Minas Gerais, but diminishing considerably after, at least until January 14. Other weather services agreed with the forecast. The coffee market remained today separated from external factors. The crude oil continued to fall below $48 per barrel, affecting other commodity and equity markets.
London Market - Opening weakness was well absorbed with trade interest taking the board into positive numbers on the morning. Structure narrowed in light trading and the market was missing origin involvement at these values. Origin has recorded limited movement over the holiday period as prices firm internally and farmers back away from the lower market. Prices lifted into the session breaking to a new high on the move and turning short term indicators on the way to attract intraday longs. Exposure increased 325 lots after the lift higher yesterday with the spot month down 178 lots to leave 490 lots open. 50 lots appeared in the grading pipeline today but as for tenders still nothing coming forward into day three. Robusta looked for the next leg higher as values consolidated around the 1950 area showing hesitation into the lost hour of the session but managed to keep the short term indicators engaged on the upside. Options put together another active session for March Calls with over 3,000 lots traded between the 2,000 and 2150 strikes – Open position on those strikes are growing with a working exposure of over 12,000 lots !