INTL FC STONE-DAILY COFFEE COMMENTARY

Arabica coffee futures consolidated lower Wednesday pressured by the currencies.  The active contract for July delivery lost 170 points to close at 130.70 cents a pound.  Volume reached 37,577 lots, including 7,559 switches. The Brazilian real devaluated 1.75%, trading at USDBRL3.2050 +520 at 12:30 pm EST.  The move was technically motivated as the real broke the upper bound of the 3.08-3.17 /USD range which triggered buy orders at 3.20/USD.  Market participants eye the Brazil March unemployment rate to be published on Friday.  The unemployment rate has deteriorated this year reaching 13.2 % in February from 12.0% reported for December.   Concerns about the economic and political events could affect the value of the real furthermore.  In other news, the Australian BOM said the ENSO remains neutral, however they added that there is 50 % chance, twice the normal likelihood of EL NINO developing in 2017.   Commodities in general have been under pressure as reflected by the CRB index that recently broke area of support.  Today major seller of consumer products as P&G, Pepsi and Nestle said slowed spending in the US cut into results in the most recent period. Nestle’s CEO said that the situation reflects a breakdown in the usual relation between economic grow and consumer spending.
 
Significant options volume traded throughout a session in which flat prices closed higher to stem recent downward trajectory.
Values looked to move higher through the early stages of trading, soon triggering light buying stops as the market breached yesterday’s high at $1945. A void of selling furthered the move, with origin pressure absent following the price action of recent days. A lack of upside traction in New York prevented further moves higher in London, with prices tailing off to around unchanged amid weakness in the Brazilian Real. A $62 trading range reflected an absence of both significant support and resistance throughout the day, with the market content to breath following a period of high activity. Volume generated via the structure was noticeably lower, with 3700 lots of May/July trading a $3 range and 2800 lots of Jul/Sep trading into $16 discount.
Large volumes traded in the options arena, with the focus predominantly on cheaper upside protection. The Sep 1850/2150 call spread traded 1500 lots at $120, alongside a 38% delta at $1940. Further volume was particularly visible around the July 2000 and 2150 calls and a close eye will remain on the build-up of exposure around these strikes.