Coffee Market Report March 13 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 22.39% during the week of trade leading up to Tuesday 7th. March; to register a net long position of 14,276 Lots on the day.  This net long position which is the equivalent of 4,047,183 bags has most likely been little changed to perhaps marginally decreased further, following the period of mixed but overall modestly negative trade, which has since followed. 

The annual coffee festival in Buon ma Thuot in the Central Highlands Dak Lak province of Vietnam has come to a close and with little in the way of striking news coming to the fore from this leading coffee province in Vietnam, other than the forecast from the Vietnam Coffee and Cocoa Association that despite the high volumes of coffee exports for the first couple of months of this year, that they foresee a 20% to 30% decline in Vietnam coffee export potential for the year.   This they say is related to the diminished carryover stocks into the recently completed October 2016 to January 2017 harvest, which they estimate to have been a significantly lower new crop.   

What was perhaps noticeable in terms of announcements during this festival, was the lack of scare stories in terms of the weather conditions towards the new harvest that is due to start in October this year.  Traditionally over the past few years there have been by March and despite the fact that the summer rain season is only due to start in April, there have been somewhat market manipulative forecasts for damaging dry weather for the coffee farms.   But this year so far, this has not been the case and by nature of the silence on the matter and with forecasts for rains due for the Central Highlands for the second half of this month and albeit early days, one might think that expectations are for a normal rain season this year and another large new coffee crop due for the end of the year.   

Thus, with the reports over the past few weeks of ample rains for the leading Brazil conilon robusta state of Espirito Santo and the normality of weather in Vietnam for the present, it would seem that while there is no doubt that there shall be a short to medium terms tightness in global robusta coffee supply, that the longer-term prospects are for increasing robusta coffee supply for the coming year.   But in the meantime, and with the early surge of robusta coffee exports from Vietnam having taken place, one can perhaps foresee these volumes starting to tail off by May and assisting by nature of less producer selling pressure over the market, to continue to buoy the prices of the relatively firm London robusta coffee market. 

The May to May contracts arbitrage between the London and New York markets broadened on Friday, to register this at 42.92 usc/Lb., while this equates to 30.36% 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 2,200 bags on Friday; to register these stocks at 1,341,074 bags.  There were meanwhile a smaller in number 395 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 27,300 bags. 

The commodity markets remained under pressure earlier in the day on Friday but with the U.S. dollar coming off the boil later in the day and shedding a little weight, the losses were limited within many markets and the relatively soft overall macro commodity index was only marginally softer for the day.    The Natural Gas, Sugar, Cocoa, New York arabica Coffee, Copper and Orange Juice markets had a day of buoyancy, while the Oil, London robusta Coffee, Cotton, 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 0.06% lower, to see this Index registered at 416.36.  The day starts with the U.S. Dollar near to steady and trading at 1.218 to Sterling and at 1.069 to the Euro, while North Sea Oil is tending softer and is selling at $ 49.75 per barrel. 

The London market started the day on Friday on a near to steady note, while the New York market had a steady start for the day, with the London market remaining near to par and the New York market showing some modest buoyancy into the early afternoon trade.    As the day progressed both markets moved up into positive territory but with the London market faltering in late trade and dipping back into negative territory, while the New York market managed to sustain its positive stance and set the markets for a mixed close.   The London market ended the day on a soft note and with 70.6% of the losses of the day intact, while the New York market ended the day on a positive note and with 62.1% of the earlier gains of the day intact.    This close while on the positive side for the more volatile New York market does not in terms of the relatively thin volumes of trade provide much of an indicator for direction, but might perhaps assist to inspire 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     2153 – 4                                                MAR   139.65 + 0.90

MAY     2170 – 12                                              MAY    141.35 + 0.90

JUL      2186 – 11                                               JUL    143.70 + 0.90

SEP      2195 – 11                                              SEP    146.00 + 0.95

NOV     2196 – 11                                               DEC   149.30 + 1.00

JAN      2196 – 10                                              MAR   152.55 + 1.00

MAR     2197 – 10                                              MAY   154.65 + 1.05

MAY     2198 – 10                                               JUL    156.35 + 1.05

JUL      2200 – 9                                                 SEP    158.00 + 1.10

SEP      2208 – 9                                                 DEC   160.25 + 1.20