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Daily Coffee Report - 04/02/2024

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Coffee Rally on Short Covering

 

Arabica futures for May delivery closed 595 points or 2.97 % higher at 197.74 cents a pound on Tuesday. The May contract posted a new high for the 2024 calendar year, at 198.40 cents. The Arabica market continues to draw support from a very firm London market. The May/July switch settled stable cutting the recent losses. Good activity on the options was noted, as delta hedge of May positions, suggested by the large open interest of the OTM calls. Traders note that dealers appear to be surprised by the rise and were forced to cover shorts. The technical strength attracted buying from speculators who have been adding longs to their positions. The last CFTC’s COT report showed non-commercials added 5,815 net longs to net long +34,284. Open interest increased 1,453 lots as of yesterday to a new high of 242,587 lots. The rise in cocoa, which is at historic highs, is also boosting the coffee market. In terms of fundamentals, focus will continue on the Brazil crop, with harvesting of the Robusta crop already underway and Arabica harvesting set to begin in the coming weeks. Additionally, the USDA will release their attaché reports throughout the month of May, which will culminate in the biannual World Coffee Report in June for the first official forecast of the 2024-2025 global supply and demand scenario. The Arabica market is also shrugging off any macro factors and is not reacting to the performance of the BRL or any other external influences.

Robusta May24 contract settled at $3663 +184 with a 3678/3486 range. A strong rally into new all-time highs for the 10 tonne contract. Simply put commercials are now facing the fact that they have to pay up to get product. Time is not on their side and prices are not coming to them. The physical issues have been bubbling away for a while now and this is the result. Stops were noted as flat price surpassed recent highs. With limited origin selling about to absorb this buying there was only once direction. Surprisingly structure remained fairly in line with May/Jul seeing an 81/90 range on just short of 7k lots. May also saw its 3rd highest volume day of the year with nearly 15k lots changing hands. Robusta Jul24 3800/3200 fence (to the call) vs 3500Δ56 traded 2900x @ 25, Robusta Jul24 3500 calls vs 3477Δ50 traded 800x @ 196. Robusta May24 3400/3800 callspread vs 3614Δ55 traded 500x @ 198.

At the time of writing

USDBRL 5.0562 +0.02 %

USDCOP 3839.9 -0.59%

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ICE Arabica

Volume:

100,809

 

ICE Robusta

Volume:

33,752

 

Brazil Arabica

Volume:

463

Arabica-Brazil Arbitrage

Arabica-Robusta Arbitrage

Arabica Switches

Robusta Switches

Related tags: Coffee

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