Evening Coffee by Societe Generale

     Consistent calls for very cold Brazilian weather sent New York coffee futures soaring today. Spot coffee traded to its highest level since October 2015. The 7.5¢ move will most likely result in an original margin increase from its current $2,400 as that amount only covers a move of 6.40¢.(7.5¢ is worth $2,812.50).
     Technically, the market broke out of a large symmetrical triangle in very high volume. The last time that we saw volume this high was at the beginning of a strong bull move (2010). The open interest fell over 9,100 lots over the past three reports (short covering). I would be surprised if we did not see new longs today given the record volume on a chart breakout.
    July New York (KCEN6) settled near its 8-month high (98%), up 7.45¢. Volume was 162% above average at an estimated 112,865 lots including an estimated 1,185 EFP's, 91 EFS's, 3,339 TAS and 42,994 spreads - over 26,000 of them involving Jul16. 21,239 calls and 10,350 puts also traded. The KCEN6-LRCN6 arbitrage: 60.85¢. Ratio: 1.7905. €: $1.1397+0.4%. BRL: 3.3743/$+2.0%. CRB: +1.7%. Crude oil: +1½%. S&P500:+0.4%. Open interest: 188,825-4,678 (50-day stochastic: 48%; 125-day: 59%).
     July London (LRCN6) settled ion its upper third (72%), up eight dollars. Volume was fifty-eight percent above average at an estimated 27,467 lots including 9,150 spreads and 523 EFP's. 4,421 calls and 1,145 puts also traded. Open interest: 104,266-349 (50-day stochastic: 0%; 125-day: 0%).
     Somar Meteorologia is calling for temperatures between 0°C and 1°C on Sunday morning in Londrina, Apucarana and Ibaiti, Brazil. The higher coffee-growing areas of Baixa Mogiana and southern Minas Gerais they expect will see temperatures between 0°C and 2°C on Monday. While Somar again stands out as projecting the most concern over the weather, the other forecasters seem to be trending a bit more on the cold side while not at present calling for damaging frost.
John Bernardi