march 1,2023

Arabica coffee futures May23 contract tested lower and below the 20-day moving average today at 181.25. The latest new shorts decided to pressure lower finding some stops below the 184 level and finding support near the 180.00. The Brazilian real provided additional support as the NY market lifted off the lows with a settlement of 275 points lower at 183.55 for the May23 contract. Market participants are digesting the lower exports from brasil in the month of February. The U.S. dollar reversed course with China’s yuan and the euro both rallying on strong economic data. China’s manufacturing PMI rose to a 52.6 reading in February (anything over 50 signals expansion), up from 50.1 in Jan and the sharpest increase since April 2012. ICE Arabica certs declined 320 bags to 787,025, pending grading remained at 54,929 bags. No grading today.
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Robusta MAY23 contract settled at $2177 +37 with a 2190/2119 range. Activity today was clearly spec driving Arb selling (sell Arabica, buy Robusta). Robusta did see a layer of origin selling (mis of Viet & India) that absorbed some of that spec buying. The daily volumes confirm this idea with the highest daily volume seen for a while 12K lots on the May23 contract alone. Spreads also firmed, more than likely a product of spec activity concentrated in May23. May/Jul saw 2.7K lots trade between 11/16. May23 2100/1950 put spread vs 2165Δ24 traded 2000x @ 36, Nov23 2300/1850 fence (to the call) vs 2071Δ50 traded 2000x @ 17, May23 2050/1950 (1x2) put spread traded 1000x @ 9.