London closed lower despite the perceivably bullish COT number, but we’re still $37 off the low, and above the lower Bollinger band at 1928. We’re still within the support band here, and it looks like Arbitrage activity may hold the key for future price action. If fresh Arb is really going on, with the short leg going into the Nov, then perhaps this will keep the Nov/Jan structure steady as we go forward.
Arabica – what to say? We firmed to settle above 131 despite earlier scares that saw us drop to 129.75. Early indications suggest that the damage from Irma in Miami and Jacksonville warehouses is light / non-existent, but we should receive further confirmation of that later this afternoon. It’s the first time we’ve had 3 positive closes since the 9th August. Expect support on a pullback into and around 130 (the 20 day MA is around 130). Note – it continues to be very dry in Brazil.
In fundamental news, there’s a couple of headlines to analyse this morning. Firstly : “Indonesia Coffee : Arrivals seen lower as middlemen keep supply”. Bloomberg report that Robusta bean arrivals to warehouses in Lampung have dropped to 950 tonnes last week from 4,000 tonnes a week earlier. Supply is very tight as middlemen are holding on to stockpiles waiting for the prices to rebound. Farmers probably hold around 10%R of beans from this year’s harvest, according to Anton Firmansyah – head of ICEA in Lampung.
The second headline of note was “Vietnam Coffee Stockpiles seen tightening, traders eye new crop” – Bloomberg report that farmers in Vietnam probably held around 2 percent of the 16/17 harvest or about 29,200 tonnes at the end of August, that compares with 10 percent of the crop a year earlier. Stockpiles have dropped after rain through Dec and Jan hurt production and damaged the quality of the beans. Current reserves are the lowest since Oct 2010 and may shrink further according to RCMA.
GBP – 1.3209
EUR – 1.1975
BRL – 3.1029