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.
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