INTL FCStone Daily Coffee Report

Arabica Coffee Futures extended last week’s increase as the dollar gave ground and constant speculative buying eroded light origin selling. The active contract for December delivery increased 170 points at 157.10 cents per pound, reaching new intraday highs throughout the session. Volume did not accompany price activity, with 22,294 lots traded today. Origin selling was limited, with a banking holiday in Colombia. GCA stocks for the month of September were published today, showing an increase of 913 bags to 6,198,110 bags. The five-year average change for September is a decrease of 73,000 bags. In related news, Procafe Group reported a water deficit for key Arabica producing areas. According to Procafe, rains in September promoted opening of some buds, yet further rains will be needed to help flowers grow. Mixed weather forecasts for the next ten days heighten uncertainty in the market. From a technical standpoint, short and medium term stochastics are entering overbought levels as we approach the upper range of the 20-day Bollinger band.
London Market- Values exploded higher as fresh spec buying lifted January prices through $2100 to record the highest levels since February 2015. A subdued morning was not a sign of things to come as prices drifted higher with the dollar returning some of its overnight gains while outright prices ticked up to the double high at $2088. Once breached, resting buy stops signalled the entry of new long positions which eroded returning origin selling at good volumes. The psychological $2100 barrier failed to provide residence, continuing to absorb Asian selling which increased in volume. Significant options activity was present with 5500 lots of the Jan 2150 call purchased at $63 with a 40% delta at $2115. Additional options activity was generated through the May 2150/2300 call spread which was bought 1000 times at $48 with a $2109.
This week’s COT figures showed the managed money net long increase by 1901 lots to 33,728 lots with 2364 new long positions established alongside 463 shorts. A small increase of 209 lots was shown In the merchants net short position with fresh long and short positons generated in near equal volumes.