INTL FCStone Daily Coffee Report for June 21, 2017

Arabica coffee futures extended losses Tuesday influenced by a general drop of the commodity complex. Crude oil prices collapsed to their lowest levels in seven months, as large specs are now aggressive playing the short side of the market. This action contributed to add pressure on the currencies of emerging market economies. The active contract for September delivery closed 200 points lower at 124.60 cents, while the benchmark July contract settled 225 lower at 121.95 cents a pound. The volume was 53,104 lots. The spread activity was reduced as we approach the first notice day for the July position. Last minute price fixing selling and a weak technical performance encouraged the non-commercial selling. In Brazil, the currency fell to 1-month low as the Senate rejects the labor reform bill in a political blow to President Temer. The real fell 1.6% to USDBRL3.3374.   The Colombian peso declined 1.8% to end at USDCOP 3,032.0. In weather news, temperatures remained in the 40s and 50s in Brazil coffee areas. Similar conditions are expected during the 6-10 days period, with little threat of frost. The Australian Bureau of Meteorology cancelled El Nino watch, after climate models began to show the lessening of the pattern. 
 
Speculative profit taking in the forward spreads and further weakness in New York pushed London lower, with the move accentuated by a void of resting commercial buying. Early weakness in the Sep/Nov spread attracted initial selling pressure to the flat prices with London going on to observe a negative trajectory thereafter. The Sep/Nov went on to trade 2700 lots, whilst weakening to $14 premium as speculative players unwound recent trading positions. The move lower dragged the July contract month away from $2100 where much of the recent trading action has looked to hold ahead of tomorrow’s option expiration. Scatterings of origin selling were visible around the top end of the sessions range although did not look to chase the market lower following good levels of recent activity.  July book management continued a pace, with 2200 lots of EFPs posted basis November represented forward financing. The July/Sep switch remains operational within a narrow recent range for now, trading 3500 around $16 discount.