Coffee Market Report April 03 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 74.42% during the week of trade leading up to Tuesday 28th. March; to register a net long position of 3,488 Lots on the day.  This net long position which is the equivalent of 988,833 bags has most likely been little changed, following the period of mixed but overall sideways trade, which has since followed. 

Despite the many forecasts that have come to the fore over the past couple of months that talk of a biennially bearing lower Brazil arabica coffee crop from this year’s pending harvest, the world’s largest coffee cooperative Cooxupé were reported on Reuters on Saturday 1st. April to have announced that they expect that they shall be in receipt of only a marginal 1.27% less coffee from this year’s harvest.  This report which indicates their expectations to receive 6.2 million bags of coffee from their farmers and coming from a cooperative that one would expect to be conservative in their forecast if only to support prices and presuming that Reuters in not party to April Fools jokes, is likely to be somewhat negative for the speculative spirits within the New York market. 

There are meanwhile reports of good flowerings within the main Central Highlands coffee districts of Vietnam, which indicate that so long as the forthcoming rain season proves to be normal, that the country shall once again be in receipt of a large new crop for the end of this year.   What is perhaps noticeable in terms of the news of good flowerings towards the new crop is that so far, this year, there has been little negative noise coming forth from Vietnam where traditionally prior to the start of the main April to October rain season, there is unfounded speculation that dry weather shall be damaging for the potential of the new crop.  Thus, for the present, forecasts are for the prevailing tight global robusta coffee supply to start to ease, by the end of the year.  

One might comment that the coffee news for the present and especially the news that Brazil might not after all experience a relatively sharp dip in arabica coffee supply with this year’s crop and along with the prospects for improve robusta coffee supply by the end of the year, is tending to look somewhat bearish for the presently flat and lacklustre coffee terminal markets.  But it is always difficult to predict the direction that the funds might wish to take and noting that the speculative longs within the New York market have been mostly liquidated over the past weeks, it is possible the markets might be able to shrug off the bearish news items that have come to the fore, so as to remain within the present relatively narrow trading range. 

The July to July contracts arbitrage between the London and New York markets broadened on Friday, to register this at 43.17 usc/Lb., while this equates to 30.48% 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 9,496 bags on Friday; to register these stocks at 1,361,597 bags.  There was meanwhile a larger in number 12,855 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 31,170 bags. 

The commodity markets were mixed in trade on Friday and with the overall macro commodity index taking a sideways track, but ending the day on the positive side of par.  The Oil, Cotton, Wheat, Corn, Gold and Silver markets had a day of buoyancy and the New York arabica Coffee market was steady, while the Natural Gas, Sugar, Cocoa, London robusta Coffee, Copper, Orange Juice and Soybean markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.06% higher, to see this Index registered at 418.12.  The day starts with the U.S. Dollar steady and trading at 1.254 to Sterling and at 1.067 to the Euro, while North Sea Oil is near to steady and is selling at $ 52.20 per barrel. 

The London market and New York markets started the day on Friday with hesitant modest buoyancy but with the London market soon coming under pressure and slipping below par and followed by the New York market, to see both markets taking a modestly negative track into the early afternoon trade.   As the afternoon progressed the London market lose a little more weight before settling on something of a sideways track for the rest of the day’s trade, while the New York market recovered into modest positive territory before slipping back to par for the close.   The London market ended the day on a modestly softer not and with 44.4% of the earlier losses of the day intact, while the New York market ended the day on a close to steady note and having recovered 96.4% of the earlier losses of the day by the close.    This close provides little in the way of direction and one might expect to see something of a slow and near to steady start for early trade today against the prices set on Friday, as follows: 

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

MAY     2149 – 12                                              MAY   139.30 unch

JUL      2171 – 8                                                 JUL    141.65 – 0.05

SEP      2179 – 7                                                SEP    144.00 – 0.05

NOV     2183 – 6                                                 DEC   147.35 – 0.05

JAN      2176 – 8                                                MAR   150.50 – 0.15

MAR     2177 – 7                                                MAY   152.60 – 0.15

MAY     2181 – 7                                                 JUL    154.35 – 0.20

JUL      2190 – 7                                                 SEP    156.00 – 0.20

SEP      2198 – 7                                                 DEC   158.10 – 0.15

NOV     2200 unch                                             MAR   160.25 – 0.05