INTL FCStone Daily Coffee Report for August 01/17

ICE Coffee Futures Settle at the Highest Levels Since May 3
 
Arabica coffee futures extended gains as spec short-covering continues. The contract with most of the activity for September delivery settled 140 points higher at 139.25 cents a pound. Volume was moderate with 27,557 lots traded, including 3,883 switches. The recent short-covering was evidenced by the open interest that declined 1,722 lots as of Friday. The OI has declined 9,311 lots since July 11. Last COT report showed that non-commercials reduced the net short position by 6,037 lots to 24,703; at the same time commercials adding 6,263 shorts for a net short position of 10,197 lots. During the month of July, Arabica coffee futures gained 10.75%  or 13.30 cents. The market was helped by the decline of the dollar that completed five consecutive months of fall. During July the dollar index fell 3.3%. weakening inflation complicated the Federal Reserve interest rate policy. After last week announcement, the FED is less likely to increase rates this year. Recently reports of borer infestation in some areas Brazil added support to the coffee prices.  In political news, the upcoming congress vote regarding the recent political scandal could bring volatility to the Brazilian currency.
 
This week’s London COT report showed a 40 lot change in the Merchants net position over the reporting period, highlighting the lack of commercial activity at current levels. Most participants continue to eye a break away from the recent $2177/$2069 range in order for volatility to return to London, although short term support emerged around $2100 last week, becoming a target through the coming sessions. The Sep/Sep arbitrage maintained a lid on flat prices once more, as values widened through 42.50 cents following moderate strength in New York. The nearby structure further illustrates the short term weakness in London, with the Sep/Nov trading into $10 premium through 1800 lots.
The July delivery contract went off the board with a further 505 tenders to leave final totals for the month standing at  7683 tenders and 4 re-tenders. Grading’s have picked up in London over the last couple of weeks with 533 lots shown to the board since July 17.