Coffee Market Report March 07 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 25.8% over the week of trade leading up to Tuesday 28th. February; to register a net long position of 14,393 Lots.   Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 5.17%, to register a net long position of 31,759 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market decreased their long position within the market by 14.4%, to register net long position of 18,395 Lots.   This net long position which is the equivalent of 5,214,901 bags has most likely been little changed to perhaps even marginally decreased, following the period of mixed but overall more negative 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 2.37% during the week of trade leading up to Tuesday 28th. February; to register a record net long position of 37,791 Lots.  This net long position which is the equivalent of 6,298,500 bags has most likely been marginally increased again, following the period of mixed but overall more positive trade that has since followed. 

The May to May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 42.75 usc/Lb., while this equates to 30.22% 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. 

While coffee consumption within the dominant developed markets in North America, Western Europe and Japan is relatively static at present, the evidence is that the developing coffee markets in Asia are maintaining steady growth and with the relatively large population Indian, Indonesian, Vietnam and Philippine markets continuing to report rising domestic consumption figures.   The former three though are significant producers of coffee and mostly robusta coffees that suit the dominance of soluble coffee consumption within these markets, while the latter Philippines have long since become a net importer of coffee. 

This growth in consumption that is being matched by consumer market growth within the developing coffee markets in the Middle East and Turkey is assisting to what many foresee to be an approximate 2.5 million bags increase in global coffee demand annually, is in terms of the present flat increase in supply a supportive factor for the longer-term coffee market prices.  But it is a relatively slow and steady factor and while one might foresee tightening supply, the resulting improved prices and with adverse weather conditions aside, is likely to assist to encourage increased supply in the form of both new coffee planting and improved farm husbandry and yields within many traditional and underperforming producer countries in Asia and Africa. 

On the short term, however and if the forecasts for yet another dismal conilon robusta coffee crop for Brazil this year shall be accompanied by a biennially bearing lower Brazil arabica crop, while the coffee supply from Vietnam for the year is tighter following their just completed lower new crop, it would support the view for a more positive coffee market to develop over the coming months.  However, with still good volumes of new crop coffees from Vietnam, Central America and Colombia still coming to the market and with the funds seemingly cautious about or somewhat distracted from the coffee markets, they remain for the present within the present trading range which offers reasonable value in terms of the London robusta coffee market, but might be seen to be somewhat modest in value in terms of the New York arabica coffee market.  

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 275 bags yesterday; to register these stocks at 1,339,834 bags.  There were meanwhile a larger in number 4,030 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 30,762 bags. 

The commodity markets were mixed in trade yesterday and with the U.S. dollar shrugging off some early weakness showing little excitement for the day, to see the overall macro commodity index only close to steady for the day.    The Natural Gas, Cotton, Orange Juice, Wheat, Soybean and Silver markets had a day of buoyancy, while the Oil, Sugar, Cocoa, Coffee, Copper, Corn and Gold markets tended softer for the day.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.01% lower, to see this Index registered at 426.94.  The day starts with the U.S. Dollar steady and trading at 1.224 to Sterling and at 1.059 to the Euro, while North Sea Oil is steady and is selling at $ 54.65 per barrel. 

The London and New York markets started the day on a steady note yesterday but with both markets coming under modest pressure and taking a softer track into the early afternoon trade, which was followed by a recovery into positive territory as the afternoon progressed.   This recovery was however not sustained and both markets once again came under pressure and moved back into negative territory, which set the markets on track for a soft end to the day.   The London market ended the day on a soft note and with 85.7% of the losses of the day intact, while the New York market ended the day on a very soft note and with 97.4% of the losses of the day intact.    This close does little to inspire but one might suspect that there might be a degree of caution towards believing in a bearish market which might assist to steady the markets for early thin trade today against the prices set yesterday, as follows: 

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

MAR     2150 – 22                                              MAR   139.65 – 1.60

MAY     2176 – 18                                              MAY    141.45 – 1.85

JUL      2193 – 16                                               JUL    143.75 – 1.85

SEP      2202 – 16                                              SEP    146.05 – 1.85

NOV     2206 – 16                                               DEC   149.30 – 1.75

JAN      2209 – 15                                              MAR   152.45 – 1.75

MAR     2210 – 15                                              MAY   154.45 – 1.70

MAY     2210 – 17                                               JUL    156.05 – 1.70

JUL      2212 – 17                                               SEP    157.65 – 0.65

SEP      2220 – 17                                               DEC   159.90 – 0.65