Coffee Commentary for July 10

ICE Coffee Futures Plunge on Speculative Liquidation

 

Arabica coffee futures plunged Thursday due to speculative liquidation following a strengthening of the  US dollar after yesterday’s announcement that the FED would terminate its bond-buying program in October, doing so in monthly increments.  The active contract for September delivery fell 990 points or 5.7 % to close at 163.00 cents a pound.  Equity and US dollar denominated commodities declined as result of a strong dollar.  The drop was further fueled after prices broke the recent support at 166, basis the September contract and due to option related selling.  A large open interest (6,377 lots) at the September 160 strike may cause further losses tomorrow. 

 

London - Volume and liquidity slowed right down this week with the market straddled with order either side of an ever decreasing price range. The origin presence above the board intensified each session as origin fixing which had been rolled forward appeared back into the market. The adjustments in the open position were minimal with the spot July exposure still holding a big working position of 3,381 lots which continues to be an issue for the market. Only 60 lots graded today which means over the few days into July the grading has been below 300 lots therefore the stock report tonight at best will be only a few hundred lots larger and they will be dependent on coffee not being called away over the reporting period. The price action gathered pace as the market traded below the 2025 trigger in September which uncovered arbitrage associated stops and prompted overhead selling from origin to follow the move lower in much better volume. The action generated enough interest to uncover more stops before the 2000 and 1980 levels as the market flushed out positions to find the next level of industry support. Arbitrage values broke towards 70 cents which was the important influence to the price action encouraging liquidation of positions. A damaging probe lower which will break the short term momentum.