INTL FCStone Daily Coffee Report

Arabica Coffee Futures ended the session slightly higher on Tuesday, on high switch volume. The active contract for July delivery settled 25 points higher at 142.40 cents per pound, while the nearby May settled 35 points higher at 140.20. Prices consolidated higher as participants focused on managing their May positions, as we approach first notice day on April 20th. Volume reached a significant 89,886 lots, including 34,610 switches. The nearby May/July traded in a 20-point range, from -230 to -210, settling at -220. Prices continue trading rangebound, as technical oscillators neutralize. The Brazilian real weakened 0.56% to USDBRL3.14, with little impact on coffee prices, as the short-term correlation decays. In related news, the IBGE increased their the 2017-18 Brazil Coffee Crop estimate by 1.5% at 45.6 million 60 kg bags, consisting of 9.4 million bags of Conillon and 36.2 million bags of Arabica.
 
With flat price action remaining operational within its recent range, focus turned to front month management in London with the bulk of the sessions volume generated through nearby structure.Values initially looked to test lower through the early stages of trading, soon breaching yesterday’s low and the 100 day moving average at $2147, triggering light technical selling stops. Further negative momentum failed to ensue as prices continued to hover around the May 2150 options strikes which expire on April 19th. Much of the rest of the session played out around the May/July spread, which traded over 7000 lots whilst weakening to $29 discount as spec longs rolled exposure down the board and into the hands of the commercial short. Flat prices rallied heading into the close, with the May/July reversing its previous action, strengthening into $21 discount and triggering buy stops as outright values moved through mid-term averages and last week’s highs. Scatterings of origin selling were eroded as the market moved higher en route to settling around the psychological $2200 barrier basis July. Good option volume saw 1100 lots of the July 2050 puts trade at $34 alongside a 25% delta hedge. The market will monitor the open interest surrounding this strike observing if further positions have been established or existing positions have been neutralised.