INTL FCStone Daily Coffee Report

Arabica coffee futures for March delivery settled 180 points higher at 144.25 cents per pound. The late rally on Friday continued today, breaking last week’s high, but failing to break the 145.00 level. Lack of follow-through prompted some short-term speculative short-covering, bringing prices down from the highs. Volume was moderate, as participants prepare for the holiday breaks. On Friday, the USDA published their biannual coffee report, noting that the global production for 2016/17 could increase by 3.7 million bags at 156.6 million bags, since the record Arabica production more than offsets the lower Robusta production in Brazil, Vietnam, and Indonesia. Global consumption was pegged at 153.3 million bags, while inventories in producing countries decrease to 5-year lows.
 
London Market- Despite Friday’s strong settlement, early indications were for a rather subdued day as the Christmas season starts to draw traders in Europe away from their desks. Early buying on the back of Friday’s strong settlement swiftly readjusted the tone but with the gains inviting scale up origin selling it still seemed as if any move would be limited. Not so. The release of the commitment of traders report appeared to confirm the market’s idea that recent fund liquidation has been met by solid roaster buying around the $2000 area and that in itself allowed the market to work off of a more solid platform going into the afternoon. Volume increased sharply as stops were elected through $2100, the swing higher generating a momentum that begun to feed on itself as intraday shorts rushed to cover. The Jan/March structure widened in line with the action on the outright, trading close to the recent high of $35 premium before settling back slightly into the end of the session. The technical ‘inverted head and shoulders’ reversal pattern on the daily chart now looks very much in play suggesting a minimum target to the upside of $2150 basis March.