ICE Coffee Futures Bounce on Short-covering

Arabica coffee futures bounced Monday on speculative short-covering. The most active contract for July delivery gained 365 points to close at 129.80 cents a pound. The market gapped at the opening and remained firm for the entire session. A substantial increase of the fund’s short position according to the last COT report induced the speculative action. The manage money net short position increased 15,087 lots, to a net short of 18,682 lots as of May 26, opening the possibility for a corrective upward move. Volume today was 35,766 lots, boosted by 8,994 switches. The active July-September switch narrowed 25 points to end at -2.20 cents. More volatility of the switch is expected as we approach to the first notice day for the July position, June 22. In Brazil, the real continued to devaluate after the Credit Suisse projected a further contraction for the Brazilian economy. The real was trading at BRL 3.1750 at 3:30 pm EST.
London Market - The short covering rally in New York provided the initial momentum for London which gained $67 as spec shorts covered, unimpeded by origin selling which was scarce. A good amount of volume was concentrated in the spreads as spec shorts continued to roll positions down the board with the N/U closing in the middle of the day’s range at -$19. The London COT showed a dramatic change in position management especially with regard to the managed money player which liquidated 3,000 longs as a result of the narrowing of the arbitrage. The net change in the overall fund long was 4,418 lots brining the position down to 8,878 lots net long. Merchant longs continued to add heavily to their position with the market coming off significantly, inducing roaster fixation, bringing the net long to over 20,000 lots!