INTL FC STONE COMMENTARY FOR JUNE 27/17

Arabica coffee futures closed higher Tuesday helped by speculative buying and lack of origin selling. The active September contract gained 80 points to end at 125.30 cents a pound. Activity was moderate with volume reaching 19,269 lots. Activity on spreads declined substantially reaching 2,715 switches. With no news, buyers were encouraged by other markets of the complex like sugar, which rebounded after hitting its lowest level in 16 months yesterday.  Cocoa for September recovered 1% to close at $1,863 per ton.  Advance of the commodity markets reflected a rise of 0.5% of the CRB index. Crude Oil rose $0.90 to $44.51. Book squaring could be expected as Friday is the end of the Q2.  With no threat of frosts, participants will pay close attention to Brazil ending stocks as the coffee year nears its end.
 
Open interest in London continues to hold a downward trajectory, falling to levels last seen late in 2016. As of the end of the first quarter of 2017, there were 158,377 open positions held in London as the managed money long continued to accumulate. Following the aggressive sell off at the end of April, as well as liquidation ahead the May17 delivery period, open interest has diminished and has continued to do so ahead of the July’s first notice day. As of the 31st March 2017, overall open interest in Robusta was 158,377 lots and as of today has fallen to 112,273 lots. This 46,104 lot reduction represents a fall of 29% and contrasts the 26,283 lot, or 13% increase in New York exposure over the same reporting period.
A combination of arbitrage trading and weakness in the forward structure saw London consolidate lower through the session to close largely unchanged. An early test higher in New York saw the Sep/Sep arbitrage widen through 31 cents as values in London failed to breach yesterday’s highs. Flat prices operated through much of the afternoon under pressure via weakness in the Sep/Nov spread which weakened $7 into $18 premium through 1300 lots. Technical targets remain much unchanged in London as with values holding above the mid-term averages and recent lows. Similarly, last week’s high at $2129 remains intact as an upside target as we head further through the week.