Evening Coffee by Societe Generale

New York coffee gapped down for the second time this month, through the middle of
yesterday's action (118.82¢), then continued lower for the next five hours, bottoming out
at 3¾¢ lower in the second hour of active trading. Early weakness in crude oil and
equities set the stage for the decline: crude oil and U.S. equities have had a 94%
correlation over the past fifty trading sessions, crude oil and arábica coffee a 75%
correlation, coffee and equities a 68% correlation. A strong rally off the lows in crude oil,
despite news of an increase in its record stockpiles, put the breaks on the selloff: coffee
rallied nearly two cents off its low, the S&P 500 reached up nearly two percent off its
lows.
May New York (KCEK6) settled in its lower half (46%), down 2¼¢. Volume was eight
percent above average at an estimated 33,858 lots including an estimated 748 EFP's,
153 EFS's, 439 TAS and 9,208 spreads. 5,080 calls and 6,714 puts also traded. The
KCEK6-LRCK6 arbitrage: 54.16¢. Ratio: 1.8710. €: $11015-0.05%. BRL:
3.9545/$+0.06%. CRB: +½%. Crude oil: +2.7%. S&P500:+0.2%. Open interest: 181,121-
1,648 (50-day stochastic: 40%; 125-day: 40%). There were no delivery notices issued.
May London (LRCK6) settled in its bottom quarter (21%), down twenty-six dollars.
Volume was fifty-one percent above average at an estimated 23,456 lots including 9,334
spreads and 1,068 EFP's. 2,465 calls and 1,250 puts also traded. Open interest:
136,963+4,051 (50-day stochastic: 78%; 125-day: 85%).     
Brazil will attempt to sell at auction roughly 188,000 60-kg bags from government
stocks tomorrow morning the agriculture ministry's crop supply agency Conab
announced. The government has had little success in selling coffee from its stocks,
estimated at 1.5 mln bags, since it started holding regular auctions late in 2015.
John Bernardi