INTL FCStone Daily Coffee Report for June 19, 2017

Arabica coffee futures fell Friday on indications that inventories in US continued to increase.  The most active contract for September delivery lost 210 points to settle at 125.95 cents, a new low for the last year.  Volume  decreased to 52,668 lots including 16,145 switches.  The nearby July-Sep switch widened 10 points to end at -2.35.  With the July OI estimated under 15k,  the lagging long liquidations could add more pressure on the switch before the first notice day, next June 22nd.  Last night GCA stock report showing  inventories in US  increasing 224,000 bags during May and reaching a new high of 7.1 million bags,  contributed to the bearish sentiment in today’s session.  Another bearish factor was the depreciation of the real that again approached USDBRL3.30 level. Uncertainty about the economic reforms affected the Brazilian currency. After the close the USDA released the Coffee: World Markets and Trade, report.  Output for 2017/18 is pegged at 159 million 60-kg bags, unchanged from the previous year, and global consumption at 158 million 60-kg  bags.  The lower output for Brazil is offset by higher productions in Vietnam, Mexico and other countries.   During the week , Arabica price fell 3.0 % or  4.00 cents.  Funds continued to add short positions. As of June 13, the  COT showed that non-commercials are holding a net short position of 30,665 lots, vs 27,011 net shorts they were holding the previous report.

Robusta maintained its upward trajectory for a third session in a row as speculative buying returned following yesterday’s dynamic settlement. Early buying absorbed overhead origin selling as values quickly moved through the nearby high at $2110, attracting additional technical buying as the pace of the move picked up, breaching the 61.8% Fibonacci retracement at $2132. Having remained content to hold around the highs of the day for much of the session, technical selling in New York dragged London lower inside the final hour as the Sep/Sep arbitrage narrowed to 30 cents. A brief dip below $2100 basis July uncovered delta hedge buying from the 5893 lots of option open interest which stand at this strike ahead of Wednesday’s open expiration. The structure in London remains closely observed with the Sep/Nov attracting good turnover once more to move to $29 premium while the July/Sep traded a $3 range through 5500 lots.