Evening Coffee by Societe Generale

     After trading marginally higher in pre-active trading, New York coffee rallied sharply after the release of a dismal U.S. jobs report, which sent the dollar sharply lower. We traded to, and closed at, the highest level in two weeks. The daily gain was the highest in exactly six months (see chart).
     Jul16 KC closed above its 40-day moving average for the first time since May 18th. Jul16 RC dipped to within $4 of its 40-day moving average, rallied to close $29 above it. The 9-day smoothed slow stochastic turned positive and signaled a bullish divergence.
     Unseasonable Brazilian rains are being blamed for delaying the harvest and diminishing the quality of the crop.
    July New York (KCEN6) settled near its high (94%), up 4.10¢. Volume was thirty-seven percent above average at an estimated 56,102 lots including an estimated 1,981 EFP's, 17 EFS's, 489 TAS and 19,014 spreads. 6,552 calls and 5,500 puts also traded. The KCEN6-LRCN6 arbitrage: 52.64¢. Ratio: 1.7072. €: $1.1339+1.7%. BRL: 3.5272/$+1.9%. CRB: +¼%. Crude oil: -1.2%. S&P500:-0.4%. Open interest: 197,938+2,573 (50-day stochastic: 91%; 125-day: 81%).
     July London (LRCN6) settled near its high (87%), up nine dollars. Volume was six percent above average at an estimated 17,855 lots including 6,366 spreads and 357 EFP's. 738 calls and 350 puts also traded. Open interest: 109,149-304 (50-day stochastic: 19%; 125-day: 11%).
     Guatemala exported 387,502 60-kg bags of coffee in May, the national coffee association Anacafé reports, down 5½% from 410,100 bags shipped in May 2015.
     The persistent rain (in Brazil) is associated with an atmospheric blocking, a phenomenon that maintains cold fronts and areas of instability over part of the coffee-producing areas. In this scenario, the cold waves cannot reach the central region of Brazil keeping away the risk of frost for the next seven days. - Somar Meteorologia
     CFTC reports that large speculators were net sellers of 10,124 lots of Coffee “C” in the week ending May 31st leaving them net short 7,078 lots. Large hedgers bought 9,017 lots reducing their net short position to 31,477 lots. Small traders bought 1,702 lots (long 7,330). Index traders sold 595 lots (long 31,224).
John Bernardi