Arabica coffee futures for September delivery closed 540 points lower at 164.85 cents a pound. The speculative liquidation continues to pressure the prices. A bearish sentiment grew this week as reports from the USDA and CoffeeNetwork foresee surplus for the 2022-23 and 2023-24 seasons. A return to warm and dry conditions this weekend and into next week for the main coffee producing areas of Brazil added to the sentiment. A slightly cooler air mass will move in later on, but frost will still not be a concern. Equity and commodity markets fell this week as investors raised concerns that a hawkish central bank’s policy could trigger recession. Crude oil prices posted a weekly decline of 3.5% with the Brent closing at $73.85 per barrel. Arabica certs were unchanged at 546,650 bags. Pending grading increased by 2,335 bags to 5,875 bags. No grading on Friday.
Another round of disappointing financial data released premarket set the tone with European stocks and the Energy complex driving losses. This saw the coffee sector swiftly engage the downside off the opening bell as the speculative community sold the market into easing commercial buying interest. Open interest data show the pace of liquidation remain consistent with exposure dropping 2,542 lots to 117,690 which will most like remain on track though the next release. Despite an almost total absence of selling out of Vietnam levels dropped nearly 3% to find initial support at nearby averages resting at $2659. Heavy Robusta option activity registered today through the mid-session, 3,000 Sep23 2300/2200 put spreads trade at $9 and 3000 Sep23 2600/2450 put spreads vs 16% delta @ 2695 trade at $48 and 6250 sep23 2550/2650 call spreads vs 12% delta @ 2696 trades at $58.
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Arabica coffee futures settled weak Thursday as speculative liquidation continued to pressure the market. The most active contract for September delivery lost 200 points to close at 170.25 cents a pound. No delivery notices were issued last night. Warmer and dryer conditions in Brazil added weight on the prices, as they should help to keep the pace of the current harvest and diminish any frost threat. Commodity and equity markets were mostly lower today. Brent crude oil fell 3.17 % to $ 73.95 per barrel. In the soft complex, sugar dropped nearly 4% as specs liquidated encouraged by positive harvest news in Brazil. After the close, the USDA released the Global Coffee report. The department foresees global production for the 23/24 growing 4.3 million bags to 174.3 million bags, while the consumption is expected to grow to 170.2 million bags from 168.2 million in the previous season. Certs stocks increased by 5,511 bags to 546,550 bags. Pending grading declined to 3,540 as 9,927 passed grading, 7,727 Brazil’s and 3,200 Rwandans. A total of 1,290 were rejected.
The Robusta terminal holds the previous day’s low to stage a $50 intraday reversal as the recent non-commercial liquidation slows, whilst roasters continue to buy into weakness. Early weakness driven by a deteriorating macro back drop saw an additional round of fund long liquidation, with heavy put spread activity noted on the move (4,000 lots sep23 2500/2300 put spreads vs laid up 2700 (14% delta) trading at $36). However, with a constant flow of roaster buying in place the early selling slowed with structure down the curve holding firm, pace to the downside slowed encouraging values to hold the previous day’s low. Following the open interest release showing a reduction of 4,915 lots of participants reversed nearby short positions into a vacuum as Vietnam remain side lined. |
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