INTL FCStone Daily Coffee Report for August 18/17

Arabica coffee futures fell Thursday on liquidation ahead of the first notice day for the September position, and speculative selling. The market fell through the recent support levels attracting new short players. Prices have failed below the 60-day moving average and now are poised to test July’s lows. A stronger dollar added pressure on the prices. The benchmark contract for September delivery lost 250 points to end at 128.45 cents a pound. The outlook for the Brazil crop has improved recently, with beneficial climate which has contributed to accelerate the progress of the harvest. The latest survey from Safras and Mercado, a well-respected Brazilian agribusiness consultant firm, showed that as of August 15th, the 2017-2018 crop was 91% harvested, up 5% from last week. This is faster than last year same date, when harvest was 86% completed and above the five-year average of 87%. The International Coffee Organization raised forecast for the 2016-17 world production to a record of 153.9 million 60-kilo bags, from previous estimate of 151.6 million.
 
London failed to track further weakness in New York, with the formation of a Doji Star suggesting that negative momentum is stalling, at least in the short term. A move through yesterday’s low attracted only minor technical selling which was comfortably absorbed by resting commercial buy orders under the market. A convincing settlement below $2050 basis Nov17 is required by technicians in order for this recent downtrend to continue, having found support at this level for three consecutive sessions. The structure held firm once more with the Sep/Nov strengthening to $9 premium through 4000 lots whilst 2800 of Nov/Jan traded out to $21 premium. Good volumes of Nov17 based options traded on both sides of the market and participants will closely monitor the buildup of exposure in November following the expiration of September based options yesterday.