Arabica coffee futures for May delivery settled 25 points lower at 190.25 cents a pound. Activity was boosted by spreads trading as we approach the first notice day for the May position on April 20. Volume reached 84,254 lots including 28,692 switches. Despite commercial buying continued to support the market, specs showed caution as values are in overbought terrain and vulnerable to have a correction. Latin American currencies rallied on a softer dollar. The firm oil prices added support. The USDBRL traded at 4.9160, the lowest level since June 2022. The USDCOP traded at 4,440, not seen since Sep 2022. Certs stocks fell by 8,512 bags to 720,992 bags. Pending grading remains at 0.
Robusta Jul23 contract settled at $2332 +9 with a 2335/2296 range. Strong rally pushing into new highs. Majority of the strength in Robusta seemed to stem from continued Arb selling (sell NY buy Robusta) into passive origin selling scale up. A slightly weaker dollar gave a small tailwind for Robusta giving the spec community an ‘’excuse’’ to add to long positions. May23/Jul continues to hold strong trading 2.3k lots between 63/89 settling at +77. May23 2400/2450 callspread vs 2388Δ18 traded 2000x @ 16, May23 2400/2250 fence (to the call) vs 2381Δ52 traded 1000x @ 29, May23/Jul23 CSO 100/70 fence (to the call) traded 1000x @ 0. 8 trading sessions remain until May23 FND on April 25th, OI currently showing 30,973, plenty of time for AA’s but worth keeping an eye on considering the strength of that spread.
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Arabica coffee futures extended the recent rally to reach the highest level since Feb 22. The benchmark contract for May delivery settled 7.90 cents higher at 190.50 cents a pound. Commercial short covering ahead of the delivery period for the May position and fund buying have found little or no selling to slow the rise. A very bullish technical outlook attracted funds and speculative buying. The Brazilian real and Colombian peso firmed as the dollar slid ahead of US inflation data Wednesday that could help gauge the FED's posture on interest rate policy. The real traded below the BRL 5.00 level for the first time since February 2nd, and the peso below COP 4,500 since January 27th. The soft commodities complex added support to the coffee. Raw sugar prices reached a 11-year peak and the cocoa an 2 ½ -year high. Certs stocks fell by 90 bags to 729,504 bags. Pending grading remains at 0.
Robusta Jul23 contract settled at $2323 +67 with a 2326/2250 range. A strong rally driven by May/Jul spread strength. The May/Jul was center stage today, seeing a 43/96 range on 8.5k lots. This has all the hallmarks of a ‘’short-squeeze’’. Industry shorts having to buy the front month spread into very little liquidity meant that they had no choice but to pay up. It seems someone may be gearing up to take delivery on the May23 23 contract; on this, it is worth reminding ourselves of the ICE rule change coming into effect on the Nov23 contract, a reduction on the stop limit from 7.5k lots to 3.5k lots. Outside of this, the Nov23 2500 call traded 1000x @ 82 and the May23/Jul23 100/70 fence (to the call) CSO traded 1000x @ 3. A soft US CPI inflation print tomorrow could be bullish commodities due to the higher probability of a FED pivot. |
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