The ZH has been under pressure for some time as the substantial long positions of specs has been rolling forward. This week the spread became steady and ended at -2.25, and -2.20 bid on the post settlement session. I’m not sure how much to read into the steady spread. It was option expiration with a high CSO OI. Still, not many traders wanted to be short this spread going into next week. If the OI remains fairly high, say 20k or more, after Friday, and if the spread remains steady it can indicate a shortage of coffee to be delivered. If there are only a few EFP posted, then it may mean an inability for longs to exchange for the physical that they desire. For now we wait and see.

The HK may be more interesting. The OI in H was at 134,831 lots and after Friday it may be higher. Of course, there are around 3 months before H expiration and FND and actual shortages may manifest themselves before. But, -2.20 in the ZH it is equal to a value of -.7333 per month. HK closed at -.50 or -.25 per month. For the sake of clarity, -.25 per month = -.75 expressed as a 3 month spread, a disparity of 1.45c between ZH and HK. Now that ZH is no longer the lead spread, HK will take its place. With the high OI in H will the value of HK come more into line with ZH.

The remaining spreads are generally steady. The mid forwards remain at slight discounts while the far forwards are trading, in low volume, at a premium. Friday there was what appeared to be origin selling in the far forwards making spreads tighter across the board.