Commentary for March 19th

ICE Coffee Drops On News of Rain

 

Arabica coffee futures dropped today with trademark volatility as reports of an inch and a half of rain displaced concerns of further dry weather, with further rains of up to 3 inches in the next five days. The May contract continued its retracement after holding steady during the early hours of the opening and recovering slightly from a low of 184.05 for a settlement of 185.50 cents a pound, 605 points lower. Technical factors played a role in today’s performance, causing acceleration in the fall as futures prices broke the lows of the last two sessions. Commercial activity was limited as traders prepare for this weekend’s NCA convention in New Orleans.

 

Despite resting selling above in London the board opened with a good mixture of buying as the board worked towards the selling above. Much of the opening sequence of business reverted back to structure with the May/July holding a small premium and the July based switches weakening into double digits to uncover good interest from trade. The market revolves around the same discussions. No stock and nothing grading. Volumes afloat from Vietnam are expected to be good but that does not mean coffee for the board. We have referred to this fact since July last year. Changes in freight rates out of Vietnam have been important with three increases this year alone. Logistics are always an issue none bigger than at the current time. Stocks build locally as bonded warehouses get very full and ownership merely changes hands. New York rolled over as the arbitrage broke below 92 cents premium to the lows of the reaction. This encouraged London to test towards the 2080 trigger which held on the first move. Robusta uncovered a mixture of liquidation in relative light volume as the action moved into a vacuum.  Stops uncovered below 2100 were well received but the board did question the short term configuration but not enough to suggest a downside break.