Coffee Futures Escalate on Options Expiration by FC Stone

Arabica coffee futures for September delivery closed on positive territory again influenced mainly by the technical action of the options expiration, the ongoing concerns of the yields in the Brazilian 2015/16 crop and the recovery of a Brazilian Real, that remains close to its historical lows. The September NY coffee contract settled at 137.50 cents per  pound,  45  points  higher.  The  volume  reached  58,348  lots  including  20,308  switches.  The  U/Z  switch  keeps widening and finally settled at -3.65 ahead of first notice day next Friday. The open interest in the U calls with strikes close to current levels was significantly higher than the open interest for the U puts, therefore the owners of these long calls made sure that the market remained well above the 135 level, where most of the open interest was to make sure they got their long futures at 135. On the fundamental side, the trade house Terraforte released a report reinstating  their  Brazilian  15/16  estimate  at  47.3  million  bags  and  affirming  concerns  over  the  carryover  stocks, estimating these at 4.65 million bags, 67% lower  than the carryover stocks  from a year ago, which also provided some bullish tone to the market today. On today’s COT report, the speculative funds reduced their short position by 7,156 lots or 62% between August 4th  and 11th , which shows the concerns of the industry over the lower yields in the
Brazilian crop this year.