FC Stone Commentary for March 6th

Profit Taking Pressures ICE Coffee

 

Arabica coffee futures dipped lower today as speculative profit taking throughout the day bore down on prices after yesterday’s close above 200 cents a pound. The most active contract for May delivery fell briskly during the morning with a brief bounce to the 200 mark giving some respite before entering an extremely choppy last half hour for final price of 194.80 cents a pound, 585 points lower. Volume was moderate considering the immense volatility, with 31,735 lots traded in an almost 1,000 point range basis May. Yesterday’s OI increased by 3,094 lots, the first big increase in recent sessions. Further weather reports today generated expectations of rains in Brazil for the next 5 days, followed by a return to drier patterns. Market analysts commented on roaster difficulties, citing record low stocks of Robusta as a limitation on alternating from an ever more expensive Arabica.

 

Traditionally London underperforms against large overnight opening calls but in this case there was enough short-covering around before the opening to make sure that the board started the session $50 higher. The strength however simply put the market right back into the jaws of the origin sellers and it was not long before the board was tracking back away from opening levels. Given last night’s performance the selling was never too aggressive, simply persistent. Weather forecasts calling for slightly damper conditions did bring some additional pressure from the spec side of the market through the second part of the session but values never felt like they were in danger of doing anything else than consolidate. In the structure, May/July lost ground trading back to level money from $7 premium.