Coffee Market Report March 06 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 14.4% during the week of trade leading up to Tuesday 28th. February; to register a net long position of 18,395 Lots on the day.  This net long position which is the equivalent of 5,214,901 bags has most likely been marginally increased again, following the period of mixed but overall more positive trade, which has since followed. 

The coffee markets encountered little in the way of striking new fundamental news last week and for the present it is business as usual, which with the main stream consumer market stocks presently good, is resulting in somewhat lacklustre physical trade.   The lack of longer term market supply concern on the part of the consumer market players perhaps being supported by not only the evidence of good stocks, but by the fact that lacking any striking nearby negative weather forecasts for any of the main producer blocs, that there is presently no reason to fear problems for medium to longer term coffee supply. 

But one might suggest that with global coffee supply for the present coffee year only close to demand and with global consumption albeit slowly still steadily growing, that there is no reason to be bearish about the medium to longer term market and that the next move out of the present trading range, is more likely to be positive in nature.   Albeit that for the present and unless the funds step in to further support the markets, the short to medium term upside for the markets is unlikely to be very aggressive in nature.   

The May to May contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 43.78 usc/Lb., while this equates to 30.55% price discount for the London robusta coffee market.  This once again narrowing arbitrage is now becoming less 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 to increase by 1,640 bags on Friday; to register these stocks at 1,340,109 bags.  There were meanwhile a larger in number 3,937 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 26,732 bags. 

The commodity markets ahead of the weekends latest Chinese economic forecasts but on the back of modestly positive U.S.A. and Euro zone economic forecasts had a mixed day on Friday, but with the overall macro commodity index taking a positive track for the day.   The Oil, Cocoa, Cotton, Copper, Orange Juice, Wheat and Corn markets had a day of buoyancy, while the Natural Gas, Sugar, Coffee, 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 0.32% higher, to see this Index registered at 426.97.  The day starts with the U.S. Dollar tending a little softer and trading at 1.228 to Sterling and at 1.060 to the Euro, while North Sea Oil is near to steady and is selling at $ 54.15 per barrel. 

The London market started the day on Friday with predictable early losses and with producer selling coming to the fore, following the previous day’s gains, while the New York market started the day with modest buoyancy and with the markets taking this mixed track into the early afternoon trade.    As the afternoon progressed the New York market started to falter and dipped back to join the London market that was taking something of a sideways negative track, within modest negative territory.   Both market continued to trade within a narrow sideways negative trading range for the rest of the day and thus, to set both markets for a softer close for the day.   The London market continued to end the day on a soft note and with 77.8% of the earlier losses of the day intact, while the New York market ended the day on a soft note and with 61.8% of the earlier losses of the day intact.   This close does little to inspire confidence but by nature of it being a more of a negative correction than a sell off and with the U.S. dollar marginally softer, one might expect to see a close to steady start for early trade today against the prices set on Friday, as follows: 

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

MAR     2172 – 20                                              MAR   141.25 – 0.95

MAY     2194 – 21                                              MAY    143.30 – 1.05

JUL      2209 – 21                                               JUL    145.60 – 1.10

SEP      2218 – 20                                              SEP    147.90 – 1.10

NOV     2222 – 19                                               DEC   151.05 – 1.10

JAN      2224 – 20                                              MAR   154.20 – 1.05

MAR     2225 – 21                                              MAY   156.15 – 1.05

MAY     2227 – 21                                               JUL    157.75 – 1.00

JUL      2229 – 21                                               SEP    159.30 – 0.90

SEP      2237 – 21                                               DEC   161.55 – 0.80