INTL FC STONE DAILY COFFEE REPORT

Arabica coffee futures dropped Monday on speculative selling.  The contract with most of the activity for July delivery fell 100 points to close at 131.90 cents per pound. Volume reached 42,660 lots including 8,564 switches. Early on the session, the market recovery slightly but surrendered as the buying eased. The market appeared isolated from the currencies, as the strong euro did not help the price action. The euro raised on France’s elections results. The Brazilian real strengthened 0.57% to USDBRL 3.127.
COT figures on Friday showed the commercial short position increasing by a net of 4,641 net shorts, to 45,815 net shorts. This was mainly by 6,030 lots of short covering and a liquidation of 1,389 longs. On the managed money side, their near flat position increased by 5,000 net longs to a net long position of 5,437 lots. This consisted of 3,519 covered shorts and 1,481 new longs. The market increased 3.15 cents during the reporting period.
 
The Robusta market tumbled for the fourth consecutive session, printing lows not seen since August 2016, amid further spec liquidation in London.
An initial, and brief test higher off the opening bell did little to encourage a wave of intra-day longs emerging and selling stops were triggered as flat prices moved through Friday’s low at $1977 basis July. With New York observing a holding pattern through much of the session, flat prices ticked back towards unchanged with considerable volume generated through the structure. The May/July switch, although significantly lower in volume than Friday, traded 6000 lots, weakening to $31 discount, with a further 4000 lots of July/Sep and 2000 lots of July/Nov trading into $18 discount and $25 discount respectively. With a void of resting commercial buying in the market,  a breach of the daily low at $1943 triggered further stops, although the weakness fell short of a test of $1900, for now. Overnight open interest fell 4026 lots, with total open interest having reduced by 18,220 lots, of 11%, through last week.
Considerable options activity was visible, with 1000 lots of the July 1650/1800/1950 put fly trading at $37. A further 500 lots of the July 2400/2000 fence traded at $103 alongside a 58% delta hedge at $1974. The open interest surrounding these strikes will remain scrutinized over the coming sessions.
This week’s COT report showed the merchants increase the net short by 6849, whilst the swap deal reduced the net short by 8115 lots. This largely reflects an 8000 lot EFS posted last week, indicating May17 financial expiry.