Coffee Commentary for Nov.6th

ICE Coffee Futures Continue to Fall on Speculative Liquidation

Arabica coffee futures continued to drop influenced by a general fall of the commodity markets and a weak technical performance. The active contract for December delivery settled 2.50 cents lower at 183.75 cents a pound.  Good activity of switches boosted the volume.   The nearby December-March switch,  widened 5 points to end at -4.25 cents due to the selling ahead of the roll of the index funds.   Volume increased slightly to 27,791 lots, including 9,460 switches.  Commodity prices remained under pressure. Crude oil fell again after OPEC reduced the demand forecast for the next 20 years.  The CRB index fell to new lows not seen since July 2010. In related news, Brazil’s real declined to a nine year low after the central bank suggested it will keep rates unchanged.  The currency lost 2.4 % to BRL2.5699 , the weakest level since April 2005. US dollar at the same time rallied against major currencies, contributing to add the bearish sentiment on the dollar denominated commodities.

 

London Market - Robusta plays the same range with the price action testing lower into the morning but holding the base line between 2020/2000 bases January. Volume has been an issue with the slow trading conditions becoming a hindrance in the market. The key to the performance of the last few days has been the management of the nearby exposure with positions leaving the market. The ratio of rolling to liquidation favours the liquidation which suggest the net manage money long is getting ever closer to what the market describes as a core exposure. Origin is forced to wait for flow which could be several weeks away but traders are carrying a good stock which needs to be positioned to take advantage of the harvest. November exposure was down to 1,282 lots after the business yesterday with the overall open position down 767 lots to 101,870. This continues the recent pattern with positions from both sides of the market exiting! The growing question will be the how much length has the funds released during the last week of trading. During that period the net exposure in London is down 10,000 lots.