Coffee commentary for Sept.18th

ICE Coffee Futures Fall

 

Arabica coffee futures fell Thursday, pressured by weakness of the real and origin selling.  The benchmark contract for December delivery lost 2% or 365 points to settle at 181.20 cents a pound.  The activity was moderate with the volume reaching 13,758 lots, including 2,293 switches.  Again the real declined, trading at BRL2.3767, the lowest level since February 21early during the session.  Commodity markets continued to decline adding bearishness to the coffee market.  The CRB index declined 517 points to end at 493.54, the lowest level September 2010.   In Brazil, producers’ selling was encouraged by the sentiment of further devaluation of the currency. The swap rates rose 10 points.  In the weather front, rains in Brazil coffee areas are expected for Friday and the weekend with amounts of 5 to 15 mm.  Another front with rains is forecasted for September 24, covering all growing areas, according with SOMAR.

London - London took its time to get into the action with selling appearing above the 1980 area linked with outstanding contracts which have been rolled being locked in. Momentum has been challenged this week with the market showing no signs of a break in either direction with the lack of volume the most important issue.

We will have more updated Exchange stocks numbers after the close tonight and with approximately 900 lots grading since the start of the month the market will be looking for at least a 500 lot increase. The overall stock position is still low compared with levels of last year. Arrival rates should increase into the second half of September reflecting the good shipments recorded out of Vietnam during late July into August but it will be important the movement reflects in the numbers and not move directly into roasting plants which has happened earlier in the year. Prices probed lower into the afternoon but were still not able to activate any follow-through style selling which was expected with prices operating towards the extreme of the recent range. The biggest disappointment was the turnover or lack of it.