INTL FCStone Daily Coffee Report for June 9,2017

Arabica coffee futures ended higher at then of a session dominated by spreads trading.  The benchmark contract for July delivery settled 60 points higher at 126.35.  Volume reached 56,719 lots including 18,667 switches.  The July-Sep switch narrowed to -2.25 cents. The market hovered for second consecutive day around the 126 level (July position), which could be the development in the short term of a bottom formation.  The rolling period is evidenced with open interest decreasing by 4,584 lots in the July contract, and a corresponding increase in forward months, with a net decrease of only 381 lots. July option expiration tomorrow might add volatility to the market, as open interest concentrates in the 125P and 140 C. In related news, the IBGE increased their estimate for Brazil’s 2017-18 coffee crop by 0.3% to 46.4 million kg bags. In currency news, the Brazilian real saw a volatile session, bouncing off session lows into positive territory against the dollar on developments on the presidential corruption scandal. The European Central Bank decided to keep their monetary policy unchanged.
 
A brief test through the weekly lows fails to provide a spark in London with values content to hold around the mid-term averages for now. A flattening out in open interest since Robusta’s breakdown towards the end of April supports the notion of recent range bound price action; something which most participants are looking for a breakout from in order to establish new positions. With current arbitrage levels maintaining a lid to the upside, a test back to $1900 basis July would be a key area in the market  for many, a level which would pose fresh questions to the 20,000 lot net long position which is held by the managed money sector. Short term attention now turns towards the macro, with results of the UK election due overnight and currency markets looking to be a key driver of direction as the week draws to a close.