Coffee Commentary September 9, 2014

ICE Coffee Prices End Lower

 

Arabica coffee futures  ended Tuesday at the lowest level of the last two weeks as the strengthened  of the  US dollar and  the weakness of other markets put pressure on the prices.  The benchmark  December contract,  fell 1.85 cents to 192.60 cents a pound.  Coffee prices have been in decline for the last three consecutive sessions  due to the weakness of the real, outweighing concerns about the dry weather  in the main growing coffee areas.  The real has dropped 2.7% since Sep 4,  trading today at BRL2.2881 or 205 points lower,  after   the  Moody  agency  service changed the outlook for Brazil government bonds rating to negative from stable.  In the Brazil  weather front,  as a cold front is moving out to the ocean,  dry weather will predominate until Sep  16, according with SOMAR.

 

London - Opening selling followed weakness in London to uncover the first round of price fix buying towards 2050 in November. Forward structure showed slight weakness to uncover trade interest. Levels operated within the existing trading range with fresh origin business limited despite stocks remaining relatively high and the volume of unfixed origin contracts which have been rolled still managing a decent volume as we look towards the new season in Vietnam.

Arbitrage values once more reflect the movement in New York with the differential back towards 98.50 bases nearby positions. The pattern of trading during the morning suggested some selling of the premium noted but that was difficult to confirm. Levels clawed higher into resting selling from 2080 in November which appeared to be belated origin interest. Changes in the open position recorded a small increase yesterday which could support ideas of some hedging following weakness. The spot month exposure is down to 618 lots. We had no tenders today with the cumulative total running at just 370 lots of which 59 are re-tenders.

Levels are trying to consolidate with the 2020/2050 area becoming a base line. The constructive technical format will only change is prices start to operate below the 2020 marker into the weekend.