Arabica coffee futures finished higher on Tuesday as forecasts for Brazil's main regions continue to show hot, dry weather. The contract with the most activity ended 115 points higher at 185.25 cents per pound. Short-term speculators generated volatility during the session by playing both sides of the market. The expected rains seem to have faded and concern returns to producers. Forecasts show dry weather for the next few days and there have already been reports of abortion of both flowers and cherries due to adverse conditions. StoneX has completed the first crop tour, which focused on the Robusta coffee producing regions. The second phase of the tour will take place early next year for the Arabica producing regions and a first official forecast for the crop will be provided based on those findings. On December 17th, CONAB will release their fourth and final survey of Brazil’s 23 crop, although these figures have already been factored into the market. Finally, on December 20th, the USDA will publish their World Coffee Report which should include any revisions to their June global supply and demand forecast. So far, based on the attaché reports, they could be revising down their production figure by 3-4 million bags.
Another explosive session observed through the Robusta terminal as origin pressure is noted more by absence, whilst roasters adjust pricing expectations in front of year end. Immediate strength off the opening bell saw values drive $80 higher through early trade as the non- commercial sector encouraged gains into a vacuum, with commercial pressure almost absent on the move. However, upside momentum started to fade into the midsession as we failed to attract fresh buying above the upper Bollinger band average, resulting in some speculative community covering early longs. Primary focus shifting to Jan24 management with an attempt higher towards the close of the session, the most active contract Mar24 settle 102 points higher at 2724 with a range of 2611/2753. Volume was moderate with a total of 34,397 including 10,132 switches. The Nov23 Cecafe release generated chatter as Conilon continues to head towards the U.K., which most participants expect to be destine for the exchange.
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A new heat wave that could raise temperatures up to 40 C. in some coffee-producing areas of Brazil encouraged speculators' buying on Monday. The contract with the most activity closed with gains of 6.95 cents or 3.92% at a rate of 184.10 cents per pound. A weather forecast for the areas of Mato Grosso do Sul, North of Sao Paulo and areas of Minas Gerais and West of Bahia indicates temperatures could reach the 40s C. or 104 F . At the same time, the models show that the rains have faded and there are only chances of reduced precipitation in the next 10 days. The technical firmness again attracted buying from speculators after noticing good support near the 175 levels. The nearby switch, March/May also firmed up by gaining 75 points to end at 2.40 cents. In other news, the situation in the Panama Canal has become more complicated due to the drought. Shipments of grains and other products have been delayed. Tomorrow begins the monthly and last meeting of the year of the Federal Reserve. A change of the interest rate is not anticipated. Today, the cert stocks increased by 960 bags to 235,659 bags. Pending grading increased 1,350 to 25,958 bags. A total of 2,560 were graded: 960 passed and 1,600 failed.
Robusta Mar24 contract settled at $2617 with a 2635/2520 range. A strong rally, with speculative and commercial buying triggered by the strong rally in Arabica and the firmer structure. A lack of selling from origin meant there was little liquidity to absorb the buying leading to breaking recent highs. Volumes remain subdued, with only 10k lots trading on the most liquid contract. Structure remains firm, Jan/Mar saw 4.2k lots trade between 28/48. Robusta CSO Jan24/Mar 40 straddle traded 500x @ 22, Robusta CSO Jan24/Mar 150/40 fence (to the put) traded 500x @ 13 |
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