Coffee's Big Moves Gives Some Traders the Jitters -- WSJ Blog

Leslie Josephs

  And the best agricultural commodity drama of 2014 goes to ... arabica coffee. (Cut to shot of

devastated frozen orange-juice concentrate market in tears.)

  Since the start of 2014, the arabica-coffee futures market posted daily moves of at least 4% on

six days. Other farm commodities like corn, cotton, sugar, soybeans or even orange-juice

concentrate, which is notorious for wintertime price swings, haven't moved 4% or more once this

year.

  Arabica-coffee prices have erased all almost all of last year's losses, as record heat and dry

weather in top coffee grower Brazil has fueled a 26% rally in 2014.

  Brazil is the source of around one-third of the world's coffee and the inclement weather and

damage is expected to hurt the country's crop this year.

  But the $8 billion market has been experiencing sharp swings as traders fret over supplies and

then take profits from those worries.

  On Thursday, arabica prices fell 5.1%, the biggest daily drop since July 2012. They were up 3%

today, trading at $1.3965 a pound.

  "It is not a place for the faint of heart and the light of wallet," said Sterling Smith, a futures

specialist at Citigroup, said of the arabica-coffee market.

  While coffee is trading around $1.40 a pound -- not much more than a cup of deli brew -- the

losses can mount. A single arabica-coffee contract is 37,500 of unroasted beans, so a 40-cent move

is over

$15,000 per contract.

As the drama continues, it poses a challenge to some small traders.

  "It's so hard to trade. It's all over the place" said Augustine Lauria, a former broker from the

now-defunct ICE trading pits, who trades independently and is eyeing investing in coffee. "I'm

waiting for an entry point, but I've got to be careful."

  To be fair, arabica-coffee's performance is a study in understatement compared with the natural

gas market , which has moved at least 5% on nine days in 2014, as a cold and snow-filled winter in

the United States pushed up prices.

Arabica Coffee Resumes Climb As Brazil Remains Dry; Orange Juice Up

  NEW YORK - Arabica-coffee futures bounced back Friday after plunging more than 5% in the previous

session, as dry weather in top grower Brazil continued to fuel worries over crop damage this year.

  Arabica for delivery in March on ICE Futures U.S. was up 2.9% at $1.3965 a pound, after hitting as

low as $1.3510 a pound earlier in the session.

  Temperatures will likely remain above normal and rainfall will be limited over the next five days,

which could deplete soil moisture and cause production losses, weather forecaster DTN said.

Brazil is the source of around one-third of the world's coffee.

  Despite the weather threat, global supplies of coffee are expected to rise by 0.5% to 145.8

million 60-kilogram bags in the 2013-14 crop year, which began Oct. 1, according to an estimate of

the International Coffee Organization.

  Frozen orange-juice concentrate for March was up 0.8% at $1.4660 a pound. Cocoa for March was 0.7%

higher at $2,906 a ton. A close above $2,918 a ton would be the highest since September 2011.

Cotton for March was up 0.4% at 86.67 cents a pound.

Kansas City, February 7 (World Weather, Inc.) – Warm temperatures and restricted rainfall will dominate Brazil coffee country for at least the next week. Any showers that occur will prove to be too light and erratically distributed to counter evaporation with temperatures staying very warm. The high pressure ridge is still expected to break down next week, but rain will be slow in returning to coffee areas. The odds remain strong that the second half of February will generate more showers and thunderstorms, but it is unclear how significant the resulting rainfall will be. The odds are good that rain intensity will still be below average.

chcoex: BRAZIL

Dry weather occurred in virtually all coffee production areas of Brazil Thursday. A few showers were noted near the coast in Bahia, but no significant rainfall reached into the key coffee production region. High temperatures were mostly in the range of 30 to 35 degrees Celsius in coffee areas, but there were some exceptions. A few locations in east-central and northeastern Minas Gerais reported highs in the upper 20s while a few other locations reported upper 30-degree highs. Northern Parana was hottest for the second day in a row with an extreme high of 38. Another location in the interior northeast part of Minas Gerais reported a high of 37.

Coffee stress will continue to climb through the weekend and into much of next week with daily weather conditions very similar to those of Thursday. Isolated showers will pop up from time to time, but nearly all of them will be too weak and light to provide

enough moisture to counter evaporation. Temperatures will remain very warm to hot, as well, with daily highs in the lower to middle 30s common and extremes reaching into the upper 30s periodically. Low temperatures at night for the coming week will be in the upper teens through the lower 20s with a couple of middle 20s possible.

Relief from the pattern is still not likely for at least the coming week. The medium range computer forecast models continue to promote an opportunity for increasing shower activity in the second half of this month, but so far, the advertised rainfall will remain notably below average. Relief is expected to be erratic in the Feb. 15-22 period, but there will be an increase in shower activity, especially from Parana to Sul de Minas, but relative to the recent days of no rain any shower activity would be an improvement. However, a general soaking of rain is needed most and that may not evolve for through the next ten days.

Robusta Coffee Slides Sharply in Europe -- Market Talk

  1202 GMT [Dow Jones] Liffe's September contract is down some 3.3% at $1,739/tonne amid a slump

that has seen recent gains come to a sudden halt. Robusta prices are likely taking the lead from

moves in the Arabica market. "Arabica prices reversed sharply as profit taking cascaded into stops

and sent the market sharply lower," notes Sterling Smith, vice president and Citi Futures and OTC

Clearing. "The situation surrounding the coffee market has not changed, and this is quite typical of

how coffee trades when prices are on the move, and more of this sort of behavior should be expected.

Breaks should be well supported," he adds, referencing bad weather problems in producing regions

that continue to keep prices cushioned.

Early Ag Weather Watch - Feb 7

EARLY LOOK WEATHER REPORT

NATIONAL TEMPERATURE/RAINFALL EXTREMES:

HIGH THU...85 AT OPA LOCKA FL AND MIAMI (KENDALL-TAMIAMI) FL

LOW  THU...47 BELOW ZERO AT WEST YELLOWSTONE MT

24 HOUR RAINFALL ENDING AT 06:00 PM CT...FRESNO CA 0.79 INCHES

US OUTLOOK AND MODEL DISCUSSION:

The US and European models are in fair to good agreement during the next 10

days, although there are still timing issues and slight differences in the

track of significant systems. I am using a little more of today's European

model during times when differences are significant.

The short range maps, days 1-5, continue to show additional extreme cold

coming southward out of central Canada towards the Midwest region early next

week. A weak southern branch trough forms over the southern plains before

moving across the lower Miss river valley during the Sunday through Tuesday

time frame. This system is not expected to have much moisture associated with

it.

The longer range maps, days 6-10, show the high latitude blocking ridge

well west and north of Alaska. We see a major trough over southwest Alaska and

the northern Pacific Ocean and a somewhat weaker polar trough centered

northeast of Hudson Bay Canada. In the US region there is expected to be a flat

ridge over California and the southwest US during this period. We see a broad

trough over the eastern US. This is still a below normal temperature pattern

for the north-central US and the MIdwest regions but it may be more variable in

nature. Temperatures in the southern plains look to turn warmer as the southern

branch trough shifts to the east. Precipitation during this period will be

associated with the eastern trough and should favor the southeast US and the

middle Atlantic region, possibly the Delta and the southeast Midwest as well.

The major snow/rain event that was mentioned yesterday for the Delta and the

east coast states is somewhat less evident today. However, the European model

still shows at least a moderate system for the southern Delta, the southeast

and middle Atlantic regions during the middle of next week. The US model is

weaker and further to the south with this system.

MAJOR WORLD HIGHLIGHTS/IMPACT:

SOUTH AMERICA: The strong ridge of high pressure remains in place over or just

east of southern Brazil for another 5 or 6 days. This means more heat and

dryness for Brazil and more heavy storms for central Argentina. Longer range

charts suggest a slight weakening of the  ridge at the end of next week which

could mean an increased chance for showers and less hot weather in Brazil. The

ridge is shown reforming during the weekend and early in the following week.

The very long range maps show the ridge weakening again later that week which

may mean more chances for scattered thundershowers and cooler temperatures.

ARGENTINA: Episodes of scattered showers and thunderstorms during the next 5-7

days and no significant heat will favor pollinating corn and developing

soybeans. However the heavy nature of these storms likely means local flooding.

Sunflower areas of La Pampa and southwest Buenos Aires look drier during this

period.

BRAZIL: A hot, dry weather pattern continues during the next 6 or 7 days. This

will deplete soil moisture and increase crop stress. Showers next week do not

appear to be enough to ease concerns for long as the ridge comes back in

towards the end of the 10 day period. Longer range charts covering the 11-16

day period suggest further weakening of the ridge. If real this would imply a

more beneficial rainfall but since it is beyond the 10 day period it is

considered uncertain.

BRAZIL COFFEE AND SUGARCANE AREAS: Temperatures are expected to average above

normal and rainfall below normal during the next 10 days. This likely means

increasing stress to coffee trees and developing sugarcane during this period.

Today's long range charts covering the 11 to 16 day period suggest a chance for

increasing shower and thundershower activity during the period Tuesday through

Friday February 18-21st.

CENTRAL/SOUTH PLAINS: Temperatures average well below normal during this week

with lows dropping significantly below zero F in north and central growing

areas. However, snow preceded the coldest of the temperatures which should

protect the crop from harm. The outlook suggests warmer and drier weather for

the region during the 6 to 10 day period. This would favor dormant winter wheat

at this time.

MIDWEST: Soft Red Winter wheat areas have been fairly cold during this week but

snow cover should protect the crop from significant winterkill. A second surge

of cold is expected early next week. The pattern may moderate somewhat later

next week. The storm track is well south and east during this period, likely

remaining south and east of the Midwest areas.

SOUTH AFRICA: Episodes of scattered to widely scattered showers and

thundershowers will favor reproductive to filling maize and sugarcane during

the next 10 days. Seasonal to a little above normal temperatures.

UKRAINE/WEST RUSSIA: The cold high pressure system that brought sub zero (F)

readings to many wheat areas last week continues to weaken and move away from

the region. Temperatures will continue a warmer trend through next week. This

will favor dormant winter wheat.

CHINA: Moderate to locally heavy snow and rain has occurred through central and

southern winter wheat areas of eastern China and through most winter rapeseed

areas. This will help to replenish soil moisture and it will favor crops when

they break dormancy in the spring. Snow to the north was not as heavy but still

fairly significant for this time of the year. Snow and ice and to a lesser

extent rain will delay transportation somewhat.

EXPANDED SUMMARIES/FORECASTS:

Midwest corn, soybean and winter wheat

Summary...

WEST: Mostly dry during the past 24 hours. Temperatures averaged well below

normal yesterday.

EAST: Mostly dry during the past 24 hours. Temperatures averaged well below

normal yesterday.

Forecast....

WEST: Mostly dry or with only a few snow showers during today through Sunday.

Temperatures average well below normal.

Mostly dry Monday and Tuesday. Dry or with only a little light snow favoring

the north and east areas during Wednesday. Temperatures are expected to be

extremely cold Monday and early Tuesday. It should turn warmer later Tuesday

and during Wednesday.

EAST: Dry today. Dry or with only a little light snow or snow showers during

the weekend. Temperatures average well below normal during this period.

Mostly dry Monday and Tuesday. Dry or with only a little light snow or snow

showers developing during Wednesday or Wednesday night and Thursday.

Temperatures should be very cold Monday and Tuesday, not as cold Wednesday but

still well below normal, warmer Thursday.

6-10 Day Outlook: Temperatures are expected to average below during the period.

Precipitation should average near to above normal south and southeast areas,

near to below normal elsewhere in the region.

Central/Southern Plains (Winter Wheat)

Summary: Dry or with only a little light snow through southern areas during the

past 24 hours. Temperatures averaged well below normal yesterday.

Forecast: Mostly dry today and Saturday. Dry or with only a little light snow

or snow showers during Sunday. Temperatures average below normal today, below

to possibly near normal tomorrow and Sunday. Warmest in western areas Saturday

and southern areas Sunday.

Chance for some light snow or snow showers during either Monday or Tuesday.

Precipitation totals mostly less than 0.25 inch and favoring south and east

areas. Drier again Wednesday. Temperatures average well below normal Monday,

below normal early Tuesday, above normal west and below normal east later

Tuesday, above normal west and south and near to below normal northeast

Wednesday.

6-10 Day Outlook...Temperatures are expected to turn warmer during this period,

possibly much warmer.  Precipitation should average near to below normal.

Brazil (Corn and Soybeans)

Summary...

Rio Grande do Sul and Parana: Mostly dry and very hot during the past 24 hours.

Highs yesterday were mostly 95 to 103 F (35-40 C).

Mato Grosso, MGDS and Goias: A few isolate showers were indicated in Mato

Grosso yesterday. Dry elsewhere in the region. Temperatures averaged near to

above normal. Highs yesterday were mostly 88 to 95 F (31-35 C).

Forecast...

Rio Grande do Sul, Parana, MGDS: Dry or with only isolated light showers today

through Sunday. Temperatures average above normal with highs each day averaging

95 to 104 F (35-40 C).

Mostly dry or with only a few light showers Monday through Wednesday.

Temperatures continue quite hot during these days. Chance for scattered showers

and thundershowers developing during Thursday or Friday. These may favor RGDS.

Temperatures should moderate somewhat during these days.

Argentina (Corn, Soybean, Wheat)

Summary...Cordoba, Sante Fe, Buenos Aires, La Pampa.

Isolated to scattered thundershowers occurred in portions of Cordoba, Sante

Fe and northeast Buenos Aires during the past 24 hours. Mostly dry elsewhere in

the region. Temperatures averaged below normal yesterday, except in the

southwest where readings were near to slightly above normal.

Forecast...

Scattered moderate to heavy showers and thunderstorms today through Sunday

will cover most of Cordoba, Sante Fe and Entre Rios and north and east areas of

Buenos Aires. Temperatures average below normal. Drier during this period for

La Pampa and southwest Buenos Aires. Temperatures in these areas should be

somewhat warmer.

Episodes of scattered showers and thundershowers continue to impact Cordoba,

Sante Fe, Entre Rios, north and east Buenos Aires during Monday through

Wednesday. Drier weather continues for La Pampa and southwest Buenos Aires

during this time. Temperatures average near to below normal.

Joel Burgio

Brazil Coffee Weather - Feb 7

SAO PAULO AND MINAS GERAIS

SUMMARY- Mostly dry or a few light showers during the past 24 hours.

Temperatures 85-99F (29-37C).

FORECAST-

TODAY...Mostly dry or a few light showers. Temperatures 85-98F (29-37C).

TONIGHT...Mostly dry conditions or a few light showers. Temperatures 61-73F

(16-23C).

TOMORROW...Mostly dry or a few light showers. Temperatures 85-99F (29-37C).

OUTLOOK...Mostly dry or a few light showers Sunday through Tuesday.

Temperatures near to above normal.

BRAZIL COFFEE PROSPECTS...

Mostly above normal temperatures and limited rainfall during the next 5 days

will deplete soil moisture and increase stress. Some production losses are

possible.

Café na ICE tem movimento corretivo e fecha com fortes perdas

Os contratos futuros de café arábica negociados na ICE Futures US encerraram esta quinta-feira com fortes quedas, refletindo algumas realizações de lucro, após as fortes altas experimentada pela commodity ao longo dos últimos dias. Ao longo de boa parte do dia, o primeiro contrato conseguiu se manter acima do nível psicológico de 140,00 centavos. No entanto, pouco antes do fechamento do intraday, um fundo teria atuado de forma mais agressiva no lado vendedor, o que acirrou as perdas e abriu espaço para stops de venda, fazendo com que o março voltasse a flutuar proximamente dos 135,00 cents. O foco dos players continua sendo os relatórios meteorológicos vindos do Brasil. O cinturão cafeeiro do país vive um período de temperaturas muito altas e com níveis de chuva bastante abaixo da média histórica para esse período do ano. Com isso, a disponibilidade hídrica do solo já recuou de forma exponencial e há sérios riscos de que os grãos sofram para ter um adequado processo de enchimento. Isso poderá afetar fortemente o volume da safra e também a qualidade do produto. De acordo com a empresa Climatempo, as chuvas previstas para ocorrer a partir da segunda quinzena de fevereiro no centro-sul brasileiro provavelmente não serão suficientes para que o mês termine com precipitações acima da média histórica. Diante da possibilidade de o Brasil ofertar um volume menor de café, as contas sobre a disponibilidade do grão já estão sendo refeitas. No início do ano, alguns players admitiam que 2014 poderia ser um ano de déficit, ao passo que agora essa possibilidade se mostra ainda mais concreta. A demanda global por café tem um crescimento apenas moderado, mas suficiente para balizar com a produção, ao passo que os estoques globais do grão estão em queda constante, o que sugere um cenário positivo para a formação de um déficit do grão.

No encerramento do dia em Nova Iorque, a posição março teve ganho de 735 pontos, com 135,75 centavos de dólar por libra peso, com a máxima em 144,15 centavos e a mínima de 134,80 centavos, com o maio registrando avanço de 725 pontos, com 137,85 centavos por libra, com a máxima em 146,10 centavos e a mínima em 136,90 centavos. Na Euronext/Liffe, o março teve alta de 3 dólares, com 1.860 dólares por tonelada, com o maio tendo desvalorização de 3 dólares, para o nível de 1.845 dólares por tonelada.

De acordo com analistas internacionais, o dia foi marcado por vendas moderadas na primeira parte da sessão. O março falhou ao tentar buscar as altas do pregão anterior e, diante disso, os vendedores ganharam corpo. As perdas variavam próximas dos 100 pontos, até algumas liquidações mais agressivas de fundos pressionarem fortemente o mercado, o que deu espaço para que as quedas fossem consideráveis. No segmento externo, o dia foi tranquilo, com altas para as bolsas internacionais e queda do dólar em relação a uma cesta de moedas internacionais. Nas commodities softs, apenas o café apresentou oscilações mais fortes, com o cacau tendo um dia de pequena valorização, assim como o suco de laranja.

"A expectativa por uma correção era crescente, principalmente após termos avançado mais de mil pontos apenas na última terça-feira. Evidentemente, que a seca e o calor trazem preocupações quanto à produção brasileira, mas o reflexo desse problema climático se deu muito rapidamente nos terminais. Esse 'efeito foguete' gera uma contraofensiva e, portanto, uma retração mais incisiva, como a desta quinta-feira, não pode ser notada como algo inesperado. Alguns players avaliaram que a possibilidade da retomada das chuvas a partir de 17 de fevereiro no centro-sul brasileiro pode ter motivado alguns fundos a liquidarem. É uma possibilidade, mas acreditamos que essa liquidação está em linha com o aspecto técnico do mercado, que subiu intensamente e que, diante disso, teria, mais cedo ou mais tarde, de passar por alguma correção", disse um trader.

A Organização Internacional do Café estimou a produção global do produto em 145,8 milhões de sacas na safra 2013/2014, o que significa uma alta de 0,5% em relação às 145,1 milhões de sacas da temporada anterior. A produção da variedade robusta, de acordo com a entidade baseada em Londres, foi estimada com uma alta de 7,2%, para 60,3 milhões de sacas, enquanto a produção de arábica foi projetada em queda de 3,8%, para 85,4 milhões de sacas.

Os estoques certificados de café na bolsa de Nova Iorque tiveram queda de 6.039 sacas, indo para 2.637.683 sacas.

Tecnicamente, o março na ICE Futures US tem resistência144,15, 144,50-144,55, 145,00, 145,50, 145,80, 146,00, 146,50, 147,00, 147,50,148,00, 148,50 e 149,00 centavos de dólar, com o suporte 134,80, 134,50,134,25, 134,00, 133,50, 133,00, 132,50, 132,00, 131,50, 131,00, 130,50,130,10-130,00, 129,50 e 129,00 centavos.

Londres reverte vendas iniciais e fecha com estabilidade

Os contratos futuros de café robusta negociados na Euronext/Liffe encerraram esta quinta-feira com poucas oscilações, em uma sessão mais calma, sem maiores atropelos e com um volume comercializado inferior ao registrado nos pregões iniciais da semana. As rolagens de posições continuam e o maio já conta com mais de 33 mil contratos em aberto, contra cerca de 26 mil do março.

De acordo com analistas internacionais, o dia teve uma tentativa inicial de jogar os preços para baixo. Com várias vendas especulativas, o março chegou a tocar o nível de 1.824 dólares, no entanto, pouco a pouco, os vendedores foram perdendo fôlego e algumas recompras foram processadas, permitindo, assim, que o março encerrasse as operações muito próximo do patamar registrado ao final da quarta-feira.

"Depois dos bons ganhos dos últimos dias seria natural algumas tentativas de realizações. Isso também foi verificado nesta quinta-feira na bolsa de Nova Iorque. Mas, ao final, o mercado demonstrou que continua bastante atento aos fatores climáticos do Brasil e voltou a ganhar corpo. A tendência é que os vietnamitas já estejam praticamente reintegrados ao mercado, depois do Tet, e, mesmo assim, verificamos que a pressão vendedora da origem não é das mais efetivas", disse um trader.

O março teve uma movimentação ao longo do dia de 6,47 mil contratos, contra 7,30 mil do maio. O spread entre as posições março e maio ficou em 15 dólares.

No encerramento do dia, o março teve alta de 3 dólares, com1.860 dólares por tonelada, com o maio tendo desvalorização de 3 dólares, para o nível de 1.845 dólares por tonelada.

Arabica Coffee Tumbles as Traders Take Profits After Rally

  NEW YORK  -  Coffee prices dropped Thursday, snapping the longest winning streak in more than two

years, as traders locked in profits from a weather-fueled rally.

  Arabica coffee for delivery in March on ICE Futures U.S. settled at $1.3575 a pound, falling 5.1%,

the biggest one-day percentage drop for the most actively traded contract since July 24, 2012.

  "What we have here is simple profit-taking," said Sterling Smith, a futures specialist at

Citigroup, referring to Thursday's move. "Volatility is the name of the game."

The consecutive days of gains was the longest since an eight-day streak ended Sept. 1, 2011.

  Arabica-coffee futures rose 22% in the week ended Wednesday, as abnormally hot and dry weather in

top coffee grower Brazil raised alarms over damage to next season's crop.

  In Brazil, coffee trees have begun to produce cherries, the fruit that contains the beans that are

roasted before they reach supermarket shelves. But the fruit is still immature and requires moisture

to ripen. Growers will start picking the crop in late April or early May.

  The dry weather and above-normal temperatures in Brazil's coffee belt is likely to continue over

the next five days, which could deplete soil moisture and cause production losses, weather

forecaster DTN said.

  The lack of rain is also a concern for sugar production. Brazil is the source of about one-fifth

of the world's sugar, and dry weather could limit how much sugar the cane there produces. Futures

prices rose 9.2% over the five previous sessions on supply concerns but fell 1.6% Thursday. Raw

sugar for March delivery ended at 15.85 cents a pound.

  Cocoa futures ended up $2 at $2,886 a ton. Stockpiles of cocoa beans in warehouses licensed by the

ICE exchange fell to a one-month low, a sign of demand for the key chocolate ingredient.

  Cotton for March ended up 0.9% at 86.31 cents a pound, while March-delivery orange-juice

concentrate fell 0.2% to end at $1.4545 a pound.