Daily Coffee Commentary - June 7, 2021

​Arabica coffee futures for July delivery settled 150 points lower at 160.15 cents a pound. Despite that analysts consider it is late for the sufficient soil moisture recovery in the Brazil’s coffee areas, reports of rains and the forecast of similar conditions for this week, influenced in today’s action. Lack of solid buying after an initial rally, encouraged the spec liquidation. Also selling of the active July / September switch added weight on the prices. During the last five years this switch has traded between -1.80 to -2.60 cents attracting substantial speculative participation. The switch weakened to -2.10 cents. A total of 28,933 switches traded, boosting the volume to 82,661 contracts. Certified stocks increased by 9,307 bags to 2,106,020 bags. Pending 108,025 bags. Daily grading 16,100. Passed 11,213. Failed 4,887. Another gravity defying performance observed through the Robusta terminal as arbitrage related support helps with upside trajectory. However, outright flow was subdued as most participants focus centred on July21 management as FND approaches. This is shown by the july21/sep21 structure accounting for 60% of the turnover as the market continues to find commercial shorts willing to roll positions forward sub $27 discount. Heavy option activity also registered with 2,000 sep21 1700/1850 calls versus a 22% delta hedge trading. Looking at the overnight exposure it would appear to be a new position, which could be the commercial sector adding to upside length or a commercial short looking to use as upside protection. Technically values drive deeper into overbought conditions, however this happens amid firm upside trend strength which provides comfort to hold longs into the move.