Commentary for Aug.7th

ICE Coffee Futures close 3% lower

 

Ice September coffee futures closed 685 points lower this Thursday provoked by speculative day trading and long liquidation given a lack of fundamentals to fuel a move higher. Throughout the morning session the market held the 188 support level, however failing to generate buying interest, driving the market to test the 185 level. Most of today’s 45,596 lot volume was concentrated in the spreads with the Sep/Dec trading 14,722 lots alone, reaching a low of -4.20. Tomorrow is September options expiry which could generate some volatility as market-makers look to square their positions.  

With regards to the climate in Brazil, temperatures in the early morning were the coldest seen this year despite not posing a threat to coffee plantations. According to Somar, temperatures are likely to remain mild and no rain is expected until the 20th of August.

In other news, Italian-based coffee firm The Massimo Zanetti Group announced that it has plans of going public on the Milan Stock Exhange, the Borsa Italiana’s Mercato Telematico Azionario later this year. The company has not publicly disclosed how much it intends to raise in the I.P.O. or at what level it expects to price the offering.

London - It was a subdued start for Robusta with the market trying to engage the upside but quick to lack follow-through with a mixture of selling materialising to edge prices lower. The Sept discounted traded to $5 making up the main part of initial turnover. Market flow revolved around the sorting out of September exposure with selling holding above the price action creating a blanket to activity. We have another update for the certified Robusta stock tonight and despite the lower volume of grading the market will still expect an increase of a few hundred lots. The most recent number recorded a figure of 7,590 lots. We would need to look back to September 2013 when we last carried a number near to this size which in the bigger picture still remains small. More liquidation confirmed by the reduction in the September open position yesterday which was down 1,798 lots leaving still 43,909 lots open. 

Prices did enough to activate underlying stops as the market broke below the 1980 area in September with bigger numbers below 1970 taking prices back to levels last traded in June. The pattern of the market suggested liquidation provided the feed for the weakness with levels struggling to consolidate into the settlement. More closing switch business widened the switch to $7 pushing turnover.