INTL FCStone Daily Coffee Report

Arabica Coffee Futures finished the last trading session in November in fresh lows, falling 245 points at 150.60 cents per pound for the March delivery contract. During the month of November, prices reached the highest level since February 2015, and lost 16%, or 28.95 cents, off the highs. Speculative long liquidation and increased origin selling pressured prices lower. The surprise in the US presidential elections, and improved weather conditions in Brazil prompted the speculative liquidation. Open interest figures have dropped by over 31,000 lots since the beginning of the month, as we entered the December delivery period. Managed money sector reached the highest net long position since 2008. In addition, weakness in the Brazilian real against the dollar, 4.6% in November, added pressure to coffee prices. From a technical standpoint, the monthly candlestick chart registered a bearish key reversal, reaching a new high and a negative close. Prices broke through the 20, 50, and 100-day moving averages, which now might provide resistance to the upside. The market remains in oversold conditions, with support near October’s low of 148.60 cents per pound and the 200-day moving average of 145.15. Failure to follow through lower might induce short covering. In related news, Brazil’s GDP figures showed that the economy shrank less than expected (-2.9% vs -3.2%), helping the BRL strengthen slightly to USDBRL 3.38. The Brazilian central bank interest lowered interest rates by 25 points to 14.75%.
 
London remained content to operate in the slipstream of New York as values closed lower for the eighth time in nine sessions.
A scattering of early origin selling set the scene for another day of negative price action. Prices then mirrored New York trading lower only to be halted by light scale down industry buying just ahead of short-term technical support around $2015.  This is likely to be a pivot point if we do continue to lose ground. The bulk of the volume was generated via the structure, with both the Jan/March and the March/May spreads trading actively but ending the session unchanged. A 2,389 lot increase in the open interest was primarily a result of the 2500 EFS posted yesterday as book management remains a focus heading into the year end.
Options generated good turnover, with 800 lots of the Jan 2000 call purchased at $80 with a 64% delta hedge at $2028. Further down the board, the March 2050 straddle traded good volumes with participants searching for cover on both sides of the market.