INTL FCStone Daily Coffee Report

Amid a bearish fundamental outlook, coffee prices declined Tuesday on speculative selling. The contract with most of the activity lost 200 points to settle at 131.45 cents a pound.  Activity increased accompanying the action, with the volume reaching 25,639 lots, including 4,645 switches. The nearby switch, July-Sep, widened 5 points to end at -2.40 cents. Last night, the April US GCA stocks report, showing the inventories at 6,890,354 bags, reaching the highest level since 1994, added to the negative outlook of coffee prices. Recent estimates for the 2017-18 Brazilian crop above 50.0 million bags hint of a smaller than expected global deficit for this season. The weak technical performance was another factor in today’s speculative selling. The breaking of the last two weeks’ lows, and the lack of positive momentum are suggesting a possible testing of the 128.75 level, for the July position. On other factors, the dollar declined 0.9 % on political news. The short-term correlation between coffee prices and the Brazilian real continues deteriorating, with coffee prices down 3.5%and the Brazilian real strengthening 1.9% in the last 10 days. The crude oil lost 0.3%.
 
Robusta finally filled the  downside gap through $1965 basis July, although a lack of technical follow through selling resulted in a further session  of limited flat price action.
Having partially plugged the gap coming into yesterday’s close, an early move lower gave additional hope to short term bears looking for further advances to the downside. Support emerged around the 50% Fibonacci retracement of London’s recent consolidation at $1958 to quash further thoughts of a test back towards $2100, which remains a short term target heading through the week. London tracked weakness in New York to breach intra-day support as the session moved into the final hour, although continued to operate a narrow trading range, with the majority of the volume generated via the structure.  The July/Sep discount continues to widen, moving into $21 discount through 2000 lots representing decent turnover for the session. Reasonable volumes traded through the structure further down the board with 1000 lots of Sep/Nov trading into $9 discount and 1100 lots of Sep/Jan into $12 discount.