INTL FCStone Daily Coffee Report

Arabica Coffee Futures for May delivery settled slightly lower on Tuesday, giving back some of the gains from yesterday’s positive movement. Open interest figures showed short covering fueled yesterday’s price action, decreasing 1,244 lots. Prices reached an early high of 142.00 (May 17) at the opening, and consolidated lower throughout the session. Intraday short covering helped prices move higher halfway into the session, on low volume, finding resistance near the 138.85 on several occasions (May 17). In related news, landslides in Colombia have blocked important routes to ports, affecting the flow of exports. Additionally, the Australian Department of Meteorology (BOM) predicts a 50% chance of El Niño in 2017. From a technical standpoint, nearby May futures see resistance near the 140.00 psychological level and the 20-day moving average of 141.70. Support can be found near the December 2016 lows of 135.20, and the May 2016 lows of 130.15.
 
The Robusta terminal consolidated following yesterday’s explosive close, under pressure from a combination of origin selling and a reluctance for  the May/May arbitrage to narrow through 40 cents.
Although technicians would have been encouraged following a bottom reversal yesterday, values fell $6 off the opening bell as overnight Asian selling immediately weighed upon the market. A negative trajectory was maintained for much of the rest of the session, with the move accelerated as values drove through the 20 day moving average at $2175 coupled with a lack of resting buy orders. Arbitrage traders ensured prices remained suppressed throughout, with May/May holding above 40 cents despite moderate weakness in New York. Despite the flat price operating under pressure, the May/July switch strengthened into $20 discount through 1300 lots, although held a narrow trading range across the session.
Good turnover was visible across the options arena, with 800 lots of the July 2400/2050 fence traded at $7 alongside 384 futures delta hedged at $2185. The posting of a 1795 lot AA in November provided further volume, which most participants have assigned to forward financing of the certified stock holder.