Coffee Market Report February 20 2017

The latest Commitment of Traders report from the New York arabica coffee market has seen the Non-Commercial Speculative sector of this market decrease their net long position within the market by 11.92% during the week of trade leading up to Tuesday 14th. February; to register a net long position of 17,511 Lots on the day.  This net long position which is the equivalent of 4,964,291 bags has most likely been since increased, following the period of mixed but overall more positive trade, which has since followed. 

The news that Brazil is due to allow for the importation of up to 1 million bags of robusta coffee over a period of four months is attracting some degree of sceptical comment, as there are some concerns over the detail of this concession to the countries soluble coffee industries.  Some commentators foresee the potential for restrictive phytosanitary regulations to be applied, which might prove to stall or delay the importation of specific lots of coffee and result in lower than expected import volumes.  Thus, for the present the news of these potential imports being approved, has not had a marked effect upon the fortunes of the London market.  

The weather reports from Brazil have indicated that last week the leading conilon robusta coffee state of Espirito Santo was in receipt of good rains, while with the exception of the very southern arabica coffee state of Parana, the majority of the main arabica coffee states encountered hot and dry weather conditions.   While Espirito Santo was forecasted to have more rains over this past weekend. 

One might think though that while the rains over Espirito Santo would have brought with them much needed relief for the conilon robusta coffee farmers, that it might be too late to assist to significantly increase the potential of the new crop that is due to start being harvested in April.   But it would with many of the farmers utilising supplementary irrigation, assist to build up resources to maintain development of the new crop and to perhaps reduce the deficit nature of this new crop as has been forecasted by many internal reports so far. 

The Rwanda Agricultural Export Board are reported to have voiced their concerns over the lack of growth in yields on the part of the countries important coffee and tea industries and are advocating increased usage of fertilisers and supplementary irrigation, as a means to improve yields.   In respect of the latter and with the countries coffee production dominated by small scale farmers and with approximately 42,000 hectares of land under coffee, the report indicates that the government is prepared to fund up to 50% of the farmer’s investments into irrigation equipment.   

The May to May contracts arbitrage between the London and New York markets broadened on Friday, to register this at 50.94 usc/Lb., while this equates to 34.06% price discount for the London robusta coffee market.  This relatively narrow arbitrage is now becoming less of an attractive factor for the roasters who have considered robusta coffees to be an opportunist discount component, within their mostly arabica coffee blends. 

The Certified washed Arabica coffee stocks held against the New York exchange were seen increase by 5,717 bags on Friday; to register these stocks at 1,321,865 bags.  There were meanwhile a smaller in number 2,732 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 42,250 bags. 

The commodity markets and with the U.S. dollar showing some degree of muscle through the day were mostly on the back foot on Friday, ahead of the long weekend for most U.S. markets that comes with todays President’s Day holiday within the majority of the states, to see the overall macro commodity index take a softer track for the day.   The New York arabica Coffee and Orange Juice markets nevertheless ended the day on a positive note and the Sugar and London robusta Coffee markets were near to steady, while the Oil, Natural Gas, Cocoa, Cotton, Copper, Wheat, Corn, Soybean, Gold and Silver markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.3% lower, to see this Index registered at 430.37.  The day starts with the U.S. Dollar steady and trading at 1.242 to Sterling and at 1.061 to the Euro, while North Sea Oil is showing a degree of buoyancy and is selling at $ 55.05 per barrel. 

The London market started the day on Friday with modest buoyancy, while the New York market started the day on a near to steady note, but with the London market soon coming under some pressure and with both markets entering the early afternoon trade to the south of par.   As the afternoon progressed the London market shrugged off most of the negative pressure, while the New York market continued on a modestly softer track and with the London market ending the day on a modestly softer note, while the New York market attracted late in the day support and pre-long weekend buy stops coming into play, to post a swift recovery.  The London market ended the day on a softer note but having recovered 76.2% of the earlier losses of the day by the close, while the New York market ended the day on a positive note and with 59% of the late in the day gains intact.   This close and with the recovery for the New York market ahead of today’s Presidents Day holiday for the market, shall perhaps prove to be positive for sentiment for the London market that shall trade solo today, to assist the London market for a steady to buoyant start for early trade today against the prices set on Friday, as follows: 

LONDON ROBUSTA US$/MT                          NEW YORK ARABICA USc/Lb. 

MAR     2144 – 5                                                MAR   147.80 + 1.50

MAY     2174 – 5                                                MAY    149.55 + 1.15

JUL      2186 – 2                                                 JUL    151.80 + 1.15

SEP      2193 – 1                                                SEP    154.10 + 1.15

NOV     2196 unch                                             DEC   157.25 + 1.15

JAN      2196 – 2                                                MAR   160.25 + 1.15

MAR     2199 – 2                                                MAY   161.95 + 1.15

MAY     2200 – 2                                                 JUL    163.45 + 1.05

JUL      2201 – 2                                                 SEP    164.95 + 1.05

SEP      2209 – 2                                                 DEC   167.00 + 0.90