Coffee commentary for May 7th

Arabica coffee futures closed higher Thursday on technical bounce. The active contract for July delivery gained 175 points to end at 131.70 cents a pound. With no fundamental news, the action was driven by short term specs that opted to cover positions at the end of the session after the prices failed to have a clear direction. The market tested several times the area 129.70/129.85 base July, which is a new short term support level. Volume was 22,901 lots, including 4,509 switches. In related news, Guatemala Coffee Exports Rose 8.7% in April and climbed to 363,357 bags vs 334,393 bags a year earlier according to Miguel Medina, president of National Coffee Association of Guatemala. In other news, the Brazilian real traded as high as 3.0504BRL in the morning and recovered to trade at 3.0247 BRL at 3:37 EST. In economic news, WTI closed at 58.94 down 3.3% on long liquidation influenced by the appreciation of the USD .
Tomorrow is June Arabica options expiration
London Market - Active opening period for London as the market continued its search for stops following the afternoon sequence yesterday. July uncovered the first batch below 1720 then again below 1700 as the market record a new contract lows on the move. Turnover was good as prices attracted a competitive element of momentum seller’s and hedge interest. As traders re-calculate numbers after sorting out the May futures position the weight of un-fixed contracts continues to grow as positions move down the board.
The supply chain in Vietnam looks to still be pretty full with collectors holding positions and even at farmer level the stock appears relative good. The pace at which that filters into the exporter’s ownership is still slow. If we look back at this week’s COT numbers for Robusta the Managed Money long was still carrying over 16,000 net long therefore the principle drive of the stops is likely to have come from this area. The main issue we carry in London is that both Spec and Commercials are still net long which combined are over 23,000 lots!It was interesting that the London open position increased by 1,164 lots into weakness yesterday even with spot May adding exposure albeit 67 lots. This provides the impression the market is getting short as the stop hunt starts. July Call options were active with over 3,000 lots of the 1800 strike trading at $30 was the main volume trade coupled with 900 lots of Sept Calls.