INTL FCStone Daily Coffee Report - Sept 18/17

Arabica Coffee futures broke through the 140.00 resistance level today, extending the seven-day rally. The active December contract settled 375 points higher at 141.40 cents per pound. Volume reached over 30K lots. Open interest decreased 3,670 lots during yesterday’s session to 200,573 open contracts. During the week prices increased 10.80 cents, helped by dry weather in Brazil, with little rain forecasted in the northern areas. A weak dollar pushed commodity prices higher, adding to the bullish sentiment. The IBGE revised their estimate for Brazil’s 2017-2018 crop 1.1% higher from last month’s estimate to 47.8 million 60-kg bags. GCA inventories fell by 147,285 bags to 7.26 million during the month of August. Historically, inventories increase over 120,000 bags or remain with minor change during the month of August.
 
A favorable macro and further momentum fueled buying in New York failed to spill over into London outrights values closed the week under pressure. A widening arbitrage weighed down on flat prices once more as the Dec/Nov widened to 50 cents, the widest levels since early May 2017. A void of resting commercial buying saw values drift lower with London unable to re-test the option strike at $2000 despite afternoon Dollar weakness. With London having traded an inside week, mid-term parameters remain intact. Participants will look for a settlement above $2030 in order for origin selling to re-enter the fray following a quiet week from the Asian markets. Reasonable volumes of front month exposure are to be carried into the second half of the month with the 56 lots tendered yesterday proving to be the only deliveries of the week. The market will maintain a close eye on the nature of the delivery period with the Vietnamese harvest approaching ever closer.