Coffee Commentary from FC Stone for Jan 22

ICE Coffee Futures Plunge 4.9 Pct on  Heavy Volume 


Arabica coffee futures plunged Tuesday   pressured by speculative selling, after the easing of the index fund buying.  The  nearby contract for March delivery fell 7.70 cents to close at 148.60 cents  a  pound.   The volume reached 41,112 lots. The activity was boosted by
switches.  The nearby switch widened slightly to end at -2.90 cents.  A weak  real in Brazil 
and the technical performance added weight on the prices.  
Last  Friday COT  report confirmed that the index funds added 8,559 lots as of last
Tuesday, and  the funds covered 7,779 shorts, evidencing   some of the reasons  
of the recent  rally.  On the technical aspect, the breaking of the last week’s
lows triggered  more liquidations and sell stop orders.   Selling related to
arbitrage trading  could add more pressure on the New York market. The March
NY-LDN narrowed to  $0.607 from $0.667 last Friday.   


  
After the opening pressure on the  March/May  structure yesterday morning which appeared to be weakened on the back  of rolling  of Managed Money longs the board adopted a more orderly flow of  business. 
Replacement style buying from industry recovered some of the opening
weakness as  the market lifted to test origin which appeared scale from 1980 in
March as the  market established the range. The environment in Vietnam has
recorded little  change of the recent past with differentials holding firm and
the local market  consistently bid which appears to have encouraged farmers to
hold stock.  Exporters are working to accumulate stock which is adding to the
local support  as the market quickly begins to think ahead to the New Year which
starts on the  8th February. Shipments numbers are expected to be good for
January with a  continued build in non-certified positions in
Europe.


London confined itself to another tight   range into the second part of the session with the action edging nearer the   origin interest above the market.
 Influenced by the move lower in New York   prices gave ground right back to the option strike which triggered some delta   stops before working back to hug the strike price, before easing again into the   closing sequence. Action has broken the momentum in today’s
  action.


ICE Coffee Warehouse Stocks were up  2,886 to  2,608,467. Pending Grading:  43,604 bags.