INTL FCStone Daily Coffee Report - Sept 26/17

Arabica coffee futures closed lower Monday as weather services continued to forecast above normal rains across Minas Gerais, Sao Paulo and Parana in the 6-10-day period that should improve soil moisture and trigger the flowering.  Over the next week, computer programs are expecting more than 70mm in Parana and Sao Paulo, and 30 mm to 50 mm in Minas Gerais.   Usually during September, rains average 62 mm.   According to SOMAR, rainfall so far in the main areas have been nil.     The most active contract for December delivery settled 290 points lower at 131.55 cents a pound.  Volume reached 26,797 lots including 3,233 switches.   A firm dollar contributed to add weight on the coffee prices.  The dollar rose 0.53% after the German election result, that could set a possible uncertainty on the political outlook. The euro fell 105 points to EURUSD1.1843.  Technically, the December chart shows a very weak action for the coffee prices.  A gap after breaking the recent consolidation makes the market vulnerable to test the recent lows at the 127 level.
 
A narrowing arbitrage and the emergence of technical support around $1990 meant outright values failed to track weakness in New York and remain operational around short term averages once more. With Friday’s release of the London COT report showing only a minor increase to the managed money net short position, early scrutiny remained on the macro following overnight Dollar strength. Initial weakness in the ‘C’ contract failed to spill into Robusta as the Dec/Nov arb narrowed further, trading into 41.50 cents. Trend line support was uncovered at $1990 basis Nov17, a level which coincides with the 38.2% Fibonacci retracement of London’s move away from the lows at $1914. With technical support standing firm, early shorts covered towards the close, as London went out broadly unchanged. A narrow daily trading range leaves mid-term parameters intact for now, with technicians looking for a settlement either side of  last week’s double high at $2038 and short term support at $1963.