Fascinating Market Action - Coffee

[bevok]

The book The Futures Game says the following about coffee:

The coffee market tends to be thin, and this condition, combined with the risk of large and unexpected supply changes, may cause extended violent moves. The coffee market is no place for the under-financed or the timid

I know I'd be feeling pretty timid if I'd been caught in a short position (their biggest three day gain since October 2002 according to Reuters):

I didn't realise there was no limit in the coffee market - what is the biggest move people have seen?

 

[pssonice]

u ve found something huge

buy

 

[wackypete2]

"Coffee buying is becoming a dangerous business."

-from the movie, Clear and Present Danger

 

[gedward3]

Does anyone know what news release caused this or have they been running
a set of Maxwell House ads again.

 

[bevok]

The story they're spinning is that there is a shortage of certified coffee to deliver against the July contract on London LIFFE, there was also talk of a major trade house that got caught short (a short squeeze has apparently been talked about for the past few days". None of it sounds especially convincing.

Oh and of course options expiry Friday - there will be some call sellers feeling a lot of pain.

 

[Black Swan]

I read about this last week on the FT and a bit in the WSJ yesterday, not my cup of tea trading coffee but fascinating stuff in terms of long term trend/impact on Starbutts etc...

http://online.wsj.com/article/SB100...8.html?mod=WSJ_WorldMarketsRIGHTMoreInMarkets


Coffee prices soared yesterday as a lack of availability in the physical market left investors scrambling to cover their positions.

Robusta, the lower-quality bean used mainly in instant coffee, spiked to a peak of $1,579 a tonne yesterday on the London market, its highest in over a year. Liffe July robusta was up as much as 18.2 per cent over the week.

Higher-quality arabica coffee gained 11 per cent on the week to*$1.485 a pound in New York.

A number of funds had been betting on lower prices for the bean, traders said, but lower-than- expected physical supplies forced them to reverse their positions.

Traders added that the price of robusta in the physical markets had been running significantly higher than the London futures price. That may have led some coffee consumers to decide to hold futures to expiry and take physical delivery of the bean, traders said, squeezing the market.

"There's a sense of panic around," one trader added.

Exports from Vietnam, the largest robusta grower, are 20.5 per cent lower than at the same point last season, according to the International Coffee Organisation.

José Sette, head of operations at the International Coffee Organisation in London, said: "The market has now realised that the Vietnamese crop is smaller than previously thought."

Inventories of robusta at Liffe-registered warehouses have fallen to 230,000 tonnes, down from nearly 400,000 tonnes a year ago.

Doug Whitehead, soft commodities analyst at Rabobank in London, expected the price spike to be temporary.

Elsewhere, oil prices recovered on the back of improving US demand and a weaker US dollar.

In late trading yesterday, Nymex July West Texas Intermediate was up 2.8 per cent on the week to $73.75 a barrel. ICE July Brent traded at $73.85 a barrel.

Gold hit a fresh nominal all-time high of $1,251.2 a troy ounce during the week. The precious metal yesterday traded at $1,227.85 an ounce, up 0.7 per cent on the week.


http://www.ft.com/cms/s/0/e52ad0fe-75ba-11df-86c4-00144feabdc0.html

 

[Waterfield]

Go ask dave, he's in a huge firm with grains and **** like that!