FC Stone Commentary for May 13th

Coffee Futures Ease 230 points on Thin Trading

 

July futures closed 230 points lower this Tuesday on speculative day trading. The market remained in the 185 – 190 range throughout the day with short bursts to the upside during the morning session, yet failing to break the 190 convincingly. As of now the market still remains extremely uncertain as to Brazilian yields and as a result traders are being forced to be much more cautious about how they operate. On Thursday the second CONAB crop estimate will be released which will give further insight into the damage caused by the drought. The USDA 2014/2015 crop estimate was revised 4.2 million bags lower to 49.5 million bags, an 8% drop compared to the previous crop due to the adverse weather conditions in Brazil. Exports are forecast at 32.38 million bags, down 1 million bags from the previous crop. Carry-over stocks are projected at 6.32 million bags, down more than 30% from the previous year.

 

London -The format of the London business followed its recent set up with the July based structure generating a big slice of the flow with the market building on the aggressive late rally of yesterday. More short covering from high frequency traders lifted the market to the 2150 trigger level in July. The market lacked resting orders with selling following the reaction from the early highs with light outright flow in both directions.

Stock numbers when they are updated should make interesting reading after the huge shipment numbers from Vietnam work into the equation. We have an updated certified report to be released on Thursday evening and as a result of Grading this month the number will be expected higher. Updated numbers from the main European ports should be available into next week. Levels could not maintain the initial push higher giving ground into the second part of the session testing back towards the 2100 marker. Arbitrage values continued on the defensive trading below 92 cents premium in July as the market lost traction on the upside in New York. No tenders posted against May today with a good clip of grading approved which brings the cumulative quantity towards 1,700 lots so far. Prices settled below the important 2100 trigger keeping the negative technical configuration in place.