Coffee Futures Push to New Lows

Arabica  coffee  futures dropped Wednesday on commercial and speculative selling. The
most active  contract for September delivery fell 170 points to close at 118.60  cents a  pound.  A weak real induced producers selling early on the  session. However  after the coffee market close, the Brazilian currency
recovered sharply  following the FED statement stating an outlook for the US  economy less  positive.  Coffee prices were also pressured as the technical  picture  deteriorated.  The breaking of the key level of 120 for the
September contract  attracted speculative participants that now anticipate  further losses.  During  the month, Arabica prices declined 140  points.  Concerns about the cold weather  in Brazil propelled the prices
against the 132.50 resistance level, helping  producers especially from Brazil  to hedge futures sales.  Exhaustion amid long  players added weight to the  liquidation that followed.    In coffee related  news, Mexico
2013-14 total output may drop as 10 %, according with Gabriela  Barrera, from  the AMECAFE.     

 
Activity  was better  during the early stages as prices probed lower searching for more  stops.  Structure uncovered good support at level money absorbing the continued  rolling  from the Index associated longs which have been so well published in  London this  year. The question of spec net exposure continues to be debated but
it is  unlikely to be above 5,000 short which as a result is considered not to  be  influential to price action. This still leaves some decent gross numbers to  be  sorted as the attention switches to September which takes over the spot  position  today.


Technical   considerations have taken on a different configuration this week as prices have   broken down but for the moment the action has not attracted fresh positions.   Origin has been left behind with the recent move lower but still has good   volumes that need to be sorted out over the next month.

 
Levels  worked lower  encouraged by the weakness in New York with the structure finding  its level as  hedge shorts came to the market and widened the premium.  Underlying bids became  a significant influence to the direction of the premium. 

Good  volume traded  out into the settlement with towards 1,900 lots of Sept/ Nov  coming together  into the closing sequence as the premium held once again. The  outright market  ended towards unchanged on the day maintaining the negative  slant which has  developed the last few days.
 
Commentary by: Int'l FC Stone