Coffee commentary for March 6th

ICE Coffee Futures End Volatile Week Only Slightly Lower


Arabica coffee futures ended higher Friday at the end of a slow session at first that later accelerated to around 25,000 contracts traded. The most active contract for May delivery closed 485 points higher at 139.90 cents a pound. A news cable quoting the head of operations at the ICO, raised concerns amid short players that have added positions recently and likely prompted their exit. According to the communique, “C” Prices are expected to increase in coming months due to a global deficit for the 2014-2015 cycle. Moreover, the ICO see world coffee consumption growing at least 2% during 2015. This week, Arabica prices reached multi-year lows at 128.80 basis the spot May contract on what appeared to be massive speculative long liquidation combined with heavy origin selling motivated by weak global currencies (vis a vis the USD), and the anticipation of yet lower prices. Despite the bearish tone, prices recovered to settle less than a penny per pound lower compared to the previous Friday close. All eyes now point to the latest Commitments of Traders data to determine whether Managed Money players are still net long, flat or potentially even net short; and weather news for clues to the development of the upcoming Brazil coffee harvest.
LONDON- The certified stock position in London increased by 5,000 lots in the past month, bringing the total as of the 2nd of March to 15,744 lots, a volume six times higher than the 2,396 lots recorded a year ago. Despite the increase in certified stock, the market’s drive lower accompanied a broader commodity move, pressured by Dollar strength as a result of US Non-Farm payrolls surpassing analyst’s expectations for job creation in February. Origin was completely absent from activity with Vietnam waiting for a rally above 1920 basis K15 to take action. With FOB differentials at origin strengthening to +20, spot coffees may become the focus of attention.