Coffee Market Report February 27 2017

The latest Commitment of Traders report from the New York arabica coffee market has seen the Non-Commercial Speculative sector of this market increase their net long position within the market by 22.71% during the week of trade leading up to Tuesday 21st. February; to register a net long position of 21,489 Lots on the day.  This net long position which is the equivalent of 6,092,036 bags has most likely been since decreased again, following the period of mixed but overall more negative trade, which has since followed. 

Brazil left the field of play late in the day on Friday, as the country closed down for the extended long weekend Carnival holiday that sees all commercial activity closed for today and tomorrow and only a partial and most probably insignificant late return to work on Wednesday, which is likely to remove the negative activity of exporter price fixation selling over the top of the New York arabica coffee market.  While following the dismal conilon robusta coffee crop last year and the resulting lack of available conilon robusta coffee stocks for purposes of export, the lack of Brazil commercial activity in terms of robusta coffees shall have no impact upon activity within the London market.   

Meanwhile the stalling of the approval for Brazil’s domestic roasters and mostly so the soluble coffee manufacturers to import up to 1 million bags of robusta coffees, is likely to be fait accompli and few expect that the gazetted approval for such imports shall be reinstated.  Especially so as with the Brazil Government and President having taken the decision to halt the progress of the matter and the indication that even if allowed that the strict phytosanitary regulations would make the imports risky in terms of rejection upon arrival, is likely to dampen the attractiveness of such imports for the industry players who were looking forward to the price relief that such imports would bring. 

The auction on Thursday of the Brazil government retention stocks of aged arabica coffees and the third such auction this year, achieved an almost 100% sale of the 146,143 bags on offer and at an average price of 1.08 usc/Lb.   These coffees directed towards the countries domestic roasters, who have been paying up over the past nine months for the traditionally more affordable conilon robusta coffees.    

Following a dry and hot spell for the main arabica coffee districts in south east Brazil over the past couple of weeks the forecasts are for good rains to come this week, which is likely to dampen some of the speculative spirits, in terms of the forecasts of some threat to the prospects of the new Brazil arabica coffee crop this year.  Albeit that many still refer to the negative influences of biennial bearing, which they speculate shall cause some degree of decline in the arabica coffee crop this year.    

It has been reported that the Ethiopian Coffee and Tea Development and Marketing Authority have reported that the countries coffee exports for the first seven months of the first seven months of the country’s financial year starting on the 8th. July 2016, were recorded at 1,610,717 bags and at a value of 360.8 million U.S. dollars.   This volume and value was they say a disappointing 15.97% and 19.68% lower than budgeted respectively, but the value of these exports was nevertheless 4% higher than the same period in the countries previous financial year.   

The May to May contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 49.82 usc/Lb., while this equates to 34.06% price discount for the London robusta coffee market.  This broadening arbitrage is now becoming more of an attractive factor for the many price sensitive roast and ground 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 decrease by 4,912 bags on Friday; to register these stocks at 1,329,914 bags.  There were meanwhile a smaller in number 175 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 32,870 bags. 

The commodity markets along with the equity markets are now tending to be focused for the short term on the pending U.S. Presidents fiscal policy speech, which shall be presented to the U.S. congress tomorrow.   While flattening our economic figures within the U.S.A. in recent days, is tending to dampen some spirits which saw the overall macro commodity index taking a softer track on Friday.   The Cotton, Copper, Soybean, Gold and Silver markets nevertheless had a day of buoyancy, while the Oil, Natural Gas, Sugar, Cocoa, Coffee, Orange Juice, Wheat and Corn markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.25% lower, to see this Index registered at 426.90.  The day starts with the U.S. Dollar steady showing some degree of buoyancy and trading at 1.242 to Sterling and at 1.056 to the Euro, while North Sea Oil is steady showing a degree of buoyancy and is selling at $ 54.95 per barrel. 

The London market started the day on Friday on a near to steady note, while the New York market started the day with modest buoyancy.  The London market did not however sustain its hesitant stability for long and started to lose its way in early afternoon trade and followed as the afternoon progressed, by the New York market likewise falling back into negative territory and with both markets taking a steady slide south for the rest of the day’s trade.   The London market continued to end the day on a soft note and with 78.4% of the earlier losses of the day intact, while the New York market ended the day on a likewise soft note and with 81.3% of the earlier losses of the day intact.  This close does little to inspire confidence and a negative technical picture is unlikely to encourage early industry buying activity, but with producer selling quiet one might expect to see something of a hesitant steady start for early trade today against the prices set on Friday, as follows: 

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

MAR     2095 – 29                                              MAR   144.40 – 3.45

MAY     2126 – 29                                              MAY    146.25 – 3.70

JUL      2143 – 27                                               JUL    148.50 – 3.70

SEP      2150 – 27                                              SEP    150.80 – 3.65

NOV     2154 – 25                                               DEC   153.95 – 3.60

JAN      2155 – 25                                              MAR   156.95 – 3.55

MAR     2158 – 25                                              MAY   158.80 – 3.45

MAY     2159 – 25                                               JUL    160.35 – 3.45

JUL      2160 – 25                                               SEP    161.80 – 3.50

SEP      2168 – 25                                               DEC   163.95 – 3.50