Coffee Commentary September 4, 2014

ICE Coffee Futures Fall on Rains News

Arabica coffee futures reverted Wednesday,  all previous day’s gains, in speculative selling.   The most active contract for December delivery settled 715 points lower at 202.30 cents a pound.  Activity was moderate with volume declining to 20,490 lots.  A 25 % of the Brazilian areas had been reported to have rains of half inch or more during the past 24 hours, however, speculative liquidation was encouraged, especially from the recent long players.  According with the SOMAR report, rains covered yesterday parts of Sao Paulo and southern Minas Gerais, with irregular amounts reaching 30mm in some regions.   The cold front associated with the rains will move out by Thursday and a dry weather pattern will be affecting the region until September 16, the Somar report added.  




London - A better presence of origin materialised into London from the opening with more competitive selling following the weakness. More of the origin related business was associated with fixing of earlier in the year which has been consistently rolled now being locked into the recent rally as prices play with the 2100 option strike. The market is still managing 3,131 lots of Calls open which has not changed over the last weeks with another 1,000 lots at 2050 with over 6 weeks still to go before they expire. Volume slowed into the afternoon as the market held against New York coming under pressure. Robusta continues to operate in the shadows of the “C” Contract with some of the buying materialising into London being longs moving across from New York. We recorded a decent increase in the open position in London throughout the board yesterday with the exposure up 1,751 lots. This immediate supported the idea of new “Managed Money” longs. The spot month position is now down to just 767 lots. Deliveries during the opening 3 days total only 370 lots of which 59 are re-tenders. Quite a different picture than we experienced in July!

Although the market showed some hesitation the overall pattern is fully in place. The board would need to operate back below the 2050 into the coming weekend to challenge the upside action of the last month.