INTL FCStone Daily Coffee Report for Sept. 13/17

Arabica Coffee futures extended gains on Tuesday, settling 2.33% or 3.20 cents higher at 135.05 for the active December contract. Volume reached 33,146 lots, including 861 switches. Prices began the session under pressure, and consolidated slightly higher in the morning. Forecasts of dry weather and below normal rainfall in most of the coffee belt attracted a wave of speculative short covering, which pushed coffee prices to the recent highs and resistance levels. Breakage of the 132.50 strike price and the 134.35 Fibonacci retracement level activated defensive buying, helping December prices settle near the highs. In related news, the IBGE increased the 2017-2018 Brazil crop estimate by 1.1% to 47.8 million bags. Estimates of Arabica coffee production increased by 0.4% from last month, now pegged at 37.4 million 60-kg bags.For Robusta (conillon), the estimated production of the country is 10.4 million 60-kg bags.
 
Nearby support remains intact as London fails to drive lower following yesterday’s weakness into the close. Flat prices responded to strength in New York to push higher although further widening of the arbitrage limited Robusta’s upside potential.  A lack of commercial interest on either side of the market did little to encourage turnover throughout the session with London’s volume the lowest since 01 September. With the market consolidating following recent heavy action, good volumes of options have traded on either side of the market. January attracted much of the volume with 1500 lots of Jan 2000 calls trading at $61 whilst 1000 lots of Jan 1950 puts traded at $95. Open interest at the Jan 2000 call stands at 1050 lots with 500 lots of Jan 1950 puts currently open.