Arabica coffee futures closed slightly lower after making new highs not seen since Q3 2022. The contract with the most activity for May delivery closed 140 points lower at 211.10 cents per pound, reverting from early high of 216.40 cents. High volatility continued to affect prices. Short-term speculator buying boosted the market early, however profit-taking later knocked prices down. The selling was encouraged by technical factors such as overbought conditions that make the market very vulnerable to a correction, and the proximity to important resistance levels against the 220 area. The CFTC’s COT data published on Friday showed once again that funds continue to add long positions, now with a net long of 43,059 lots, while the short commercial position expanded by 12,540 lots to a net short of 98,353 lots. Certified stocks added 2,100 bags to 615,652 bags. Pending grading increased by 770 bags to 73,884 bags. Total graded today 4,990 bags.
Robusta May24 contract settled at $3742 with a 3793/3701 range. Early in the session flat price struggled to gain traction, under pressure from the weakening structure. May/Jul continued lower printing a new recent low of 51 eventually rally back to unchanged to print a high of 77 on 7k lots. Commercial activity was sporadic with a small amount of commercial buying seen scale down. It seemed the rally into the close was more short covering from earlier shorts going into the market rather than fresh longs or commercial pressure. Robusta May24 3750/3300 putspread vs 3776Δ44 traded 250x @ 82.
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Arabica futures settled higher for third consecutive session supported by commercial short covering. The firmness of the London market also continues to boost Arabica prices. The most active contract for May delivery closed 585 points higher at 203.60 cents a pound. Volume expanded to 108,026 lots, including 35,950 switches. The rise has surprised dealers that have been forced to cover positions. Non-commercials have been adding long positions as trade and the industry have been very bearish for Arabica, with many reports released in recent days highlighting a negative point of view. It is also important to remember that the majority of industry forecasts are seeing a surplus of Arabica coffee for the current coffee year. There has also been research and data that shows that the once strong biennial crop in Brazil is lessening, and production is stabilizing from year to year, indicating that even in an “off-year,” Brazil’s crop could remain very high should it be spared any weather damage.
Technically, breaking of the 200-level triggered good buying. However, overbought conditions made the market vulnerable for a correction. The open interest increased 5,154 lots as of yesterday to 247,741 lots, evidencing the new long positions. Cert stocks increased by 12,603 bags to 616,682 bags. Pending grading added 5,237 bags to 73,888 bags. A total of 21,713 bags were graded. 12,603 passed (2,673 BR, 1,925 GU, 275 ME, 4,410 NI, 2,250 PE, 320 TZ, 750 VE), and 9,110 failed ( 1,100 GU, 1,100 ME, 4,950 PE, 960 TZ, 1,100 VE). Robusta May24 contract settled at $3812 +149 with a 3838/3634 range. Another strong rally with further commercial hedge lifting being the main driver of prices higher. A real lack of meaningful selling was present to absorb the buying. Structure remains stubborn with no real movement, May/Jul saw a 81/88 range on 10k lots. Outright volumes were the highest we have seen for months with 19k lots trading on May24 alone. Another busy day in the option space with the highlights being: Robusta Jul24 2800 put traded 2800x @ 11, Robusta Jul24 3500/3250 putspread vs 3660Δ16 traded1 1500x @ 84, Robusta Jul24 3400 calls vs 3678Δ72 traded 1000x @ 376, Robusta Jul24 3500/4000 callspread vs sell 3100 put traded 700x @ 200. |
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