Coffee Market Report February 21 2017

The latest Commitment of Traders report from the New York arabica coffee market has seen the shorter term in nature Managed Money fund sector of this market decrease their net long position within the market by 17.33% over the week of trade leading up to Tuesday 14th. February; to register a net long position of 16,608 Lots.   Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 2.21%, to register a net long position of 36,208 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market decreased their long position within the market by 11.92%, to register net long position of 17,551 Lots.   This net long position which is the equivalent of 4,964,291 bags has most likely been marginally increased, following the period of mixed but overall more positive trade which has since followed and likewise, that of the Managed Money fund sector of the market. 

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative Non-Commercial sector of this market decrease their net long position within this market by 8.78% during the week of trade leading up to Tuesday 14th. February; to register a record net long position of 39,682 Lots.  This net long position which is the equivalent of 6,613,667 bags has most likely been increased again, following the period of mixed but overall more positive trade that has since followed. 

Predictably the new rules related to the importation of up to 1 million bags of robusta coffee into Brazil that were gazetted yesterday, are very strict in terms of the requirement for fumigation certification and for phytosanitary certification controls.   With the further stipulation that if any type of insect contamination is found within any of the shipments, that it would result in the suspension of the robusta coffee imports.   Thus, indicating that there might be hurdles to the fore, in terms of the pending imports of robusta coffee into Brazil. 

One might comment that with the risk that even with fumigation prior to shipment that while killing any insects within the coffee might not damage eggs and that new insects would hatch while the coffee is in transit, that many potential importers in Brazil might fear the risk of taking advantage of the concession to allow for the import of supplementary stocks of robusta coffee.   This might slow the start of the importation of robusta coffees and their marginal impact upon global robusta coffee supply, albeit that once some successful imports are concluded that it would most likely accelerate further import activity.   

The May to May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 50.39 usc/Lb., while this equates to 33.69% 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 6,569 bags yesterday; to register these stocks at 1,328,434 bags.  There were meanwhile a larger in number 8,654 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 33,596 bags. 

With the Presidents Holiday in the U.S.A. yesterday there were a number of markets closed for the day, which resulted in a lack of general direction for the global commodity markets for the day.  There are however positive forecasts in terms of economic growth coming to the fore from China, which assists to buoy confidence within many markets.  The Oil, London robusta Coffee, Copper, Orange Juice and Silver markets were nevertheless showing buoyancy for the day, while the Natural Gas, Sugar, Cocoa, Cotton, Wheat, Corn, Soybean and Gold markets tended softer for the day.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets and lacking full market participation cannot be quoted for yesterday, to see this Index registered at Friday’s level of 430.37.  The day starts with the U.S. Dollar showing a degree of buoyancy and trading at 1.244 to Sterling and at 1.058 to the Euro, while North Sea Oil is steady and is selling at $ 55.25 per barrel. 

The London market trading solo for the day started the day on a steady note but soon moving modestly south of par, to take a marginally softer track into the early afternoon trade.   As the afternoon progressed though and within an environment of thin and lacklustre trade, the market moved back into positive territory and to retain its buoyancy through to the close.  The London market ended the day on a positive note and with 85.7% of the gains of the day intact, to mirror the positive close of the New York market on Friday.  One might think that this could be supportive for confidence and that the markets might be due for a relatively steady start for early trade today against the close in London yesterday and the close in New York on Friday, as follows: 

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

MAR     2156 + 12                                              MAR   147.80 + 1.50

MAY     2186 + 12                                              MAY    149.55 + 1.15

JUL      2196 + 10                                               JUL    151.80 + 1.15

SEP      2201 + 8                                                SEP    154.10 + 1.15

NOV     2204 + 8                                                 DEC   157.25 + 1.15

JAN      2204 + 8                                                MAR   160.25 + 1.15

MAR     2207 + 8                                                MAY   161.95 + 1.15

MAY     2208 + 8                                                 JUL    163.45 + 1.05

JUL      2209 + 8                                                 SEP    164.95 + 1.05

SEP      2217 + 8                                                 DEC   167.00 + 0.90