INTL FC STONE- DAILY REPORT

Arabica coffee futures closed higher after recovering from the initial selling. The active contract for July delivery ended 50 points higher at 132.40 cents a pound. Volume reached 34,637 lots including 6,386 switches. The active July-Sept switch narrowed 5 points to end at -2.40 cents. In the options, good volume was significant at the July 155-160 calls spreads (1,000 lots) and the September 125 puts (1,100 lots). The currencies again played a bearish factor on coffee prices. The real weakened on rumors that the heath-care reform will be postponed.  The real traded at USDBRL3.1650 +365 at 12:30 pm EST.  The Colombian peso declined ahead of a possible raise of the rate. Sources indicated that there is 90% probability for an increase of 25 bps on Friday Ban-Rep’s meeting. The USCOP2,901.7 +307.  The coffee market was also affected by the fall of the Robusta market that lost 1.1%. Tomorrow the BOM- Australia will publish EL NINO update report.
 
Outright values in London operated in negative territory for the fifth session in a row, while Put option open interest continues to build in response to weakness in the futures market.
Prices briefly tested higher off the opening bell, although followed a similar pattern to yesterday’s session with upward traction failing to establish. An early test of the nearby low at $1906 basis July created a double low which, once breached, propelled outright prices below $1900, triggering further selling.  Commercial buying volume increased around these levels, supporting the market towards the lower realms  of the day’s range, preventing further weakness which has been a feature of recent sessions. This provided a base for values to tick back higher for the rest of the day, supported by New York holding in positive territory throughout. The May/July switch traded 5800 lots and weakened to $33 discount as residual longs roll down the board ahead of first notice day, whilst 4800 lots of Jul/Sep traded into $16 discount.
Overnight put option open interest increased by 4385 lots and considerable turnover was once again 1000 lots of July 2100 puts rolled into Sep 2000 puts . Call options were also sought, with considerable activity in the July 1800/2100 call spread and the open interest around these strikes will be monitored once open interest is released in the morning.