INTL FCStone Daily Coffee Report for June 5, 2017

Arabica coffee futures fell Friday to the lowest price of the last 12 months. The most active contract for July delivery settled 215 points lower at 125.55 cents a pound. Volume expanded to 48,669 lots, including 11,660 switches. The active July-Sep attracted most of the activity ahead of the roll period next week. The weak technical performance encouraged the speculative selling. Breaking of the recent low at 127.15 , basis the July position, signaled a new objective to the 12500-12450 area, confirming the market is still in a bearish trend. During the week, Arabica prices lost 4.2 %. Specs took advantage of the rise at the beginning of the week to add positions. The real remained weak on political concerns. The commodity markets in general fell in fears of slowing growth in China and global surpluses . The Bloomberg commodity index has fallen constantly since February.

- COT as of 05/30/2017 shows non-commercials increased net short position by 2,866 lots to 18,852. Commercials reduced net short position by 2,878 lots to 18,216 lots

Robusta offers further resilience today, initially eroding light resting origin offers above $1985/$1990 forcing arbitrage values basis July/July to test sub 36.5 cents. Structure dominated focus and turnover in London, with spot July/Sep trading over 3,000 lots as values operated for much of the session at $21 discount in anticipation of the index roll, due to commence Monday 5th June. Forward spreads continued to operate through an increasing premium driven by the speculative community responding to quality issues and firm Asian differentials.

The recent arbitrage movement calms even the most bearish participants in Arabica, as a majority of the market believes Robusta in comparison to Arabica sub 37 cents is unsustainable in terms of value, which would lead to a fundamental shift. We do not believe this will result in a mass sell- off in the Robusta market but more a slow reaction to any potential upside gains in Arabica.

Technically Robusta continues to show marginal upside potential as near term averages provide support, helped by the slow stochastics driving higher in neutral territory. Short term price targets would stand at $2042 basis July17.