INTL FCStone Daily Coffee Report

Arabica coffee futures rallied Wednesday on speculative buying encouraged by the technical performance and helped by a general improving of the commodity prices. The most active contract for March delivery settled with gains of 4.40 cents to 141.80 cents a pound. Volume reached 30,787 lots, including 4,730 switches. Options volume was significant at the March 140 CALL with a volume of more than 500 lots. The breakage of the 139 level was welcomed by the long players who now are eyeing a possible move to the 150 area, where the next resistance is found. A general advance of the commodities helped to support the move. Commodities had a revival during the 2016 (The Bloomberg commodity Index gained 11.0 % during 2016). Industrial metals had the best performance while agricultural were mixed. Investor funds have been monitoring closely the performance, adding long positions as commodities could become again a very attractive asset class this year.
 
London Market-The Robusta market recorded its highest levels in 8 weeks, responding to strength in the ‘c’ contract, although upward momentum was capped via arbitrage traders.
A subdued opening saw scatterings of origin selling remain active, though lacking sufficient volume to drive values lower. Any thoughts of a quiet session were erased, however, with a sustained rally in New York attracting additional short term longs back into London as values drove above the near term high at $2143. Higher values uncovered further clips of origin selling in greater volumes, providing strong residence at the upper end of the day’s range. The arbitrage proved to be the most significant limit on upside traction, as traders looked to reverse recent positions, selling London, with the March/March widening to 43.5 cents.
The options market generated good turnover, with 1850 lots of the March 2200 call bought at $63 with a 40% delta at $2150. Cheap downside protection attracted further volume, with 500 lots of the March 1900 put traded at $6.