Coffee Commentary for June 11, 2013

ICE
Coffee Futures Settle Lower but Off the  Lows
  


Arabica coffee futures settled
  lower but recovering from early losses.  The active
contract for  July delivery closed 105 points lower at 127.70 cents a pound
while the  September contract declined 125 points to 129.60 cents a pound. A
heavy  number of switches boosted the volume that reached 63,212
lots.  The active  July-September switch narrowed 20 point to end at -1.90
cents.   The prices were  pressured early on origin selling and the
London market action, however short  term spec short covering made prices to
recover.  In Brazil, the real reversed  course and closed with gains
following a sale of more than USD$2 billion swap  auctions by the central
bank.  The real traded down to BRL 2.16 before to the  bank’s intervention
but bounced to end at BRL2.1350.  Commodity and equity  markets fell today
following comment from the Bank of Japan’s Governor Kuroda  saying that there is
no need to extend monetary stimulus.   



More volume
  coming together as the board worked lower with the combination of more system
  related selling adding to origin which created a powerful combination into the
  session. The July structure widened as origin selling pressured the spot month
  influenced by weaker currency in Indonesia. Vietnam selling which had been
  building above the board adjusted to compete with the spec selling which drove
  the weakness.  The July discount pushed out towards $25 opening more
opportunity  to get hedge books down the board before another wave of managed
money rolling  lifted the discount into the afternoon boosting the volume. Over
the last 2 days  grading has increased as coffee moves sheds into a delivery
position. Another  115 lots were approved today taking the cumulative total
approved this month to  323 lots of which 90% has been from Indonesia.  As
traders update their export  numbers from Vietnam the final May numbers is
likely to be near 115,000 tonnes  which compares with 190,000 tonnes in the same
month last year. The figures for  July last year reached 141,000 tonnes with
many traders expecting a number below  100,000 for this year. Differentials have
weakened but overall remain strong.   The combination of spec and origin
selling maintained pressure into the closing  sequence as the board traded to
new contract lows encouraging the technical  configuration attracting fresh
positions.