INTL FCStone Daily Coffee Report (Oct.11/16)

Arabica Coffee Futures ended sharply higher on Monday, with the most active contract for December delivery settling 485 points higher at 152.85 cents per pound. Prices began the session firm, following Friday’s bounce from nearby support. Weather reports stating that rains will slow down in the coffee regions in Brazil attracted speculative buying. According to SOMAR, rains will weaken and the temperature will rise in most producing areas for the next 10 days. STOP orders were activated when prices broke through recent highs and the 20 day moving average on the upside, accelerating the movement. Strengthening of producing countries’ currencies on the back of crude oil’s recovery capped origin selling, which accompanied by speculative profit taking, brought prices down 100 points from the highs towards the close.
London Market-London continued to drive higher as flat price activity tracked additional strength in the ‘C’ contract.
An early retraction below $2000 was a result of final hour weakness in New York on Friday, where values bounced and pushed higher throughout the session. Consistent origin selling was present through the higher end of the day’s range which was absorbed as the market edged higher. The Nov/Jan switch attracted good volume as values weakened a further $2 to -$30, with spec long positions continuing to be rolled in the hands of the commercial short as November book management takes shape.
This week’s COT report versus disaggregated futures and options saw the merchants reduce the net short position to 40,663 lots, a reduction of 3100 lots. 1843 lots of this were fresh long positons reflecting roaster buying which an additional 1257 shorts were covered. The managed money community reduced the net long by 3182 lots, which now stands at 31827. Options activity remained with 350 lots of the March 2250/1900 fence traded (to the put) with a 52% delta at $2050.