INTL FCStone Daily Coffee Report

Arabica coffee futures consolidated higher Friday on speculative short covering and quarterly book squaring. The active contract for December delivery settled 140 points higher at 151.55 cents a pound. Volume reached 29,744 lots including 6,449 switches. The active December-March switch narrowed 5 points to end at -3.30 cents. Good volume on the March 170 calls, with more than 2,000 contracts traded. Currencies in Brazil and Colombia were supported by higher prices of the crude oil, which settled up 0.86 % at $48.24 per barrel. USDBRL 3.2528 - 80 and the USCOP 2,881 - 115. During the month of September the Arabica market added 3.06% or 4.50 cents. The volatility expanded during the second week as prices for the active contract traded with a range of 14.00 cents, between 146.60 and 160.60. A tight s&d balance appears to keep prices very vulnerable to high volatility for this season. A very dry month raised concerns for the development of the coffee trees after early rains triggered some flowering. According with SOMAR, although premature , some Arabica producing areas like Mogiana, Cerrado and South of Minas received between 60 to 80 percent lower rainfall than the mean for the month. In Espiritu Santo, the Conilon crop seems more affected, with total rainfall of 50 percent below the average.
London Market- A further tepid session in London drew the week to close as the market failed to attract momentum in either direction. A weak macro picture as a result of ongoing concerns in the banking sector ensued bearish sentiment on the opening as ‘safe haven’ investments remained to be sought. An $11 fall off the opening bell was the result of final hour weakness in New York yesterday evening, although further downside traction failed to establish. Additional price activity through the session was a result of movements in the ‘C’ contract as the arbitrage narrowed a further cent to 61.18. Option activity of note was seen through the Jan 1900 put as 750 lots were bought at $37 with a 26% delta hedge at $2015. Additional option turnover was achieved as 650 lots of the Nov 1800 and 1850 puts were purchased at $1 and $5 respectively. 3913 lots of open interest at the Nov 2000 call remains a magnet for short term price activity and a fresh wave of positions will be required to draw the market away from current values.