INTL FCStone Daily Coffee Report

Arabica coffee futures suffered a sharp fall on Thursday amid a new political scandal that shocked Brazil. The most active contract for July delivery settled 475 points lower to 129.65 cents a pound. Volume increased to 46,005 lots, including 8,819 switches. The active nearby switch July-Sep ended at -2.40 cents. In Brazil, a local newspaper reported that President Temer was recorded encouraging a business man to continue to bribe a corrupt politician in exchange for silence. Analysts anticipate that the Brazil government’s reform agenda could now fail. The forex situation was chaotic. The real crashed against the dollar, with bids at USDBRL3.4100. Authorities had to expand the daily limit for the real to 9% from 6% to ease the trading. The strike affecting the main port of Colombia continues for the third consecutive day. The Colombian peso devaluated to USDCOP2,932 impacted by the real.  CONAB published the second official survey of the Brazilian 2017-18 crop at 45.5 million 60-kg bags. The USDA updated their estimate of the Colombian 2016/17 crop from 14 to 14.5 million bags.
 
London played out the entirety of the session within yesterday’s range, performing the role of the secondary market to a more volatile ‘C’ contract which was dominated by severe weakness in the Brazilian Real. Overnight reports circulated that President Termer had been caught up in a bribery scandal, a justifiable cause for impeachment, which immediately placed London under pressure as spec shorts responded to the news.  A lack of resting buying did little to stem the move, support instead arriving via the arbitrage as the July/July narrowed into 39.5 cents. A failure to move through yesterday’s low at $1953 prevented a test of the $1950 option strike, with London remaining content to hold in the middle of recent trading ranges. Much of the traded volume was a result of the structure, with 1700 lots of July/Sep trading as values narrowed into $19 discount, whilst the Sep/Nov also saw 1700 lots of turnover.
There was activity regarding the May delivery month for the first time since May 5th, with 18 lots re-tendered. Monthly totals now stand at 573 originals and 110 re-tenders.