Coffee Commentary for Sept.29th

ICE Coffee Futures Close Firm on Weather News

Arabica coffee futures closed firm Monday as less than expected rains in Brazil  during the weekend prompted speculative short-covering.  The most active contract for December delivery settled 520 points higher at 191.25 cents a pound.  The volume reached 15,068 lots, including 2,304 switches.  Rains in the main growing areas were reported to cover only a 25 %, with less amounts than previously estimated. In addition,  World Weather Inc. from Kansas,  predicted that rainfall during  the first 10 days of October will be below average.  With the prices respecting the support under 180  and less rains in the forecast,  it appears now that short players are getting nervous and will be forced to cover.  An advance above 192-195 on the December contract,  will push the prices against the 210 level.

London - Generally the transfer of the Robusta contract to ICE went well this morning with the main issue being the price reporting codes changing for most vendors. Opening strength attracted overnight selling as the board recorded early weakness. Light Asian price fix buying provided underlying support with Vietnam supplying resting selling scale from 1960 as an overhang in early activity. Some evidence of arbitrage interest with the selling of London against New York as the market worked on verbal reports out of Brazil of rains not hitting areas or levels forecast into the weekend. 

London COT numbers reflected a similar pattern to New York with the market $56 lower and the open position down 1,663 lots which immediately suggested more liquidation from the Managed Money long. Gross long was down 4,309 lots which took the net long down by 4,738 lots to 22,374. The Merchant position increased its gross long by 5,713 lots which reduced the net short by 4,778 lots to 24,835. This looked like a clear position switch between the categories which appeared to fit the general perception that the market had of last week’s action.

Levels consolidated the lift into the afternoon as prices worked back towards short term averages in preparation for the end of the quarter tomorrow. The base area of 1920 in November remains the downside marker.