Coffee Commentary September 15, 2014

ICE Coffee Futures Close Lower

 Arabica coffee futures closed lower Friday pressured by a weak real. The  most active contract for December delivery settled 90 points lower at 184.20 cents a pound.  Prices were under pressure after the opening , trading with losses or more than  $0.05 at 180.65 cents.  The real extended the weekly fall to the largest in a year, after a new poll showed bigger support for President Rousseff.  The real declined 1.3 % to BRL 2.3450.  Analysts are now predicting  that the real could  decline to BRL2.4500, the 2013 lows.  In related news, an statistic study published by CONAB,  projects the potential for the 2015 crop at 48.8 million bags.  Conab will publish a revision of the 2014 crop next week, and the first estimate of the 2015 crop in January.  During the week, Arabica  prices fell 1,350 points or 6.8%.  The liquidation was caused by devaluation of the real, rains forecast, and the negative technical picture.

London - Pace in London was much slower today into the session with the board trying to lift away from the 1980 pivot area but struggled to gather traction. Arbitrage differentials continued to narrow operating towards 91 cent premium but the flow of business was not as dominate. Technical aspects of the market have been questioned this week with the spec involvement being whipped around since early August. The “Managed Money” long added over 3,500 lots taking the net long to 26,606 if we refer back to the last COT report. After the follow-through weakness yesterday the working exposure was down over 3,200 lots of which the bulk of the adjustment was in the November supporting the theory that liquidation does provide the main drive behind the weakness. Grading has improved slightly this week but still not reaching the numbers the market expected against September. No deliveries today so we are looking at only 660 lots issued on the month of which the re-tenders have reached 174 well below the numbers recorded in July. London held the important trigger of 1980 in London with the settlement below 2000 keeping the market on the defensive into next week with pressure on new longs.