Coffee Market Report November 21 2016

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 12.56% during the week of trade leading up to Tuesday 15th. November; to register a net long position of 51,553 Lots on the day.  This net long position which is the equivalent of 14,615,047 bags has most likely been decreased, following the period of mixed but overall more negative trade, which has since followed. 

The Uganda Coffee Development Authority USDA have reported that the countries robusta coffee exports for the month of October were 18,876 bags or 12.73% lower than the same month last year, at a total of 129,402 bags.  Whereas the countries arabica coffee exports for the month were 5,156 bags or 6.88% higher than the same month last year, at a total of 80,076 bags. 

This bought the total exports for the month to have been 13,720 bags or 5.15% lower than the same month last year, at a total of 209,478 bags.   However, with the improved reference prices of the international coffee markets, the value of the coffee exports for the month of October was US$ 1,364,230.00 or 5.97% higher than the same month last year, at a total of US$ 24,232,079.00. 

There were however fair rains within many of the main coffee districts in Uganda through the month and into this month, which will assist towards development of maturing coffee cherries and with the prospects for improved production and exports for this month, which the USDA have forecasted shall improve to something in the order of 260,000 bags.   Assisting Uganda to build towards the retention of it number on position in terms of African coffee export volumes for this new October 2016 to September 2017 coffee year, with Ethiopia coming in as a relatively close second in terms of African coffee supply to the consumer markets. 

The bid by the domestic coffee industry in the Brazil to have their government lift the restriction on the importation of robusta coffees and mostly directed towards the substantial volume of conilon robusta coffees that are held within the certified robusta coffee stocks of the London market, has seemingly failed.   The failure of this request was confirmed by the Brazil government, who have said late on Friday that there would need to be extensive and long term analysis on the importation of pest risk that might come with such imports, which would seemingly eliminate the possibility of such imports for the foreseeable future. 

This bid had been requested by the Brazilian roasting industry so as to enable them to supplement this year’s dismal new conilon robusta crop, but with the apparent failure of the bid they shall have to continue to focus on higher volumes of lower grade arabica coffees to contribute to their blends.   Thus, eliminating the competitiveness of Brazil arabica grinder grades within the consumer markets and likewise, tending to inflate the prices of the Rio Minas coffees that are favoured in many markets in the South East of Europe and in the Middle East.  

The March to March contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 66.12 usc/Lb., while this equates to a 40.79% price discount for the London robusta coffee market.  This arbitrage remains an attractive factor for the 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 decrease by 1,304 bags on Friday; to register these stocks at 1,272,225 bags.  There was meanwhile a larger in volume 3,410 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 12,280 bags. 

The commodity markets continued to encounter the renewed muscle of the U.S. dollar on Friday but with mixed fortunes for the markets, thus allowing for the overall macro commodity index to maintain a steady track for the day.   The Natural Gas, Cocoa, Wheat, Corn and Soybean markets had a day of buoyancy, while the Oil, Sugar, Coffee, Cotton, Copper, Orange Juice, 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 0.11% higher; to see this Index registered at 414.07.   The day starts with the U.S. dollar steady and trading at 1.233 to Sterling and 1.060 to the Euro, while North Sea Oil is showing a degree of modest buoyancy and is selling at 45.55 per barrel. 

The London and New York markets started the day on Friday on a softer note and maintained a softer stance into the afternoon trade when the New York market started to attract some support and bounced back to par and thereon, into modest positive territory, while the London market remained within a narrow sideways negative trading range.  The recovery for the New York market did however come under pressure in late trade and the market once again came under pressure, to dip back into negative territory and take a negative track into the close.   The London market ended the day on a soft note and with 47.8% of the earlier losses of the day intact, while the New York market likewise ended the day on a soft note and with 54.8% of the earlier losses of the day intact.    This close continues to paint a negative technical picture for the markets and with the strong U.S. dollar in play, one might expect to see little better than a near to steady start for early trade today against the prices set yesterday, as follows: 

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

NOV     2201 – 19                                               DEC   157.85 – 1.45

JAN      2152 – 11                                              MAR   162.10 – 0.85

MAR     2116 – 16                                              MAY   164.35 – 0.95

MAY     2117 – 16                                                JUL   166.40 – 0.95

JUL      2114 – 19                                                SEP   168.20 – 1.00

SEP      2113 – 23                                               DEC   170.60 – 1.05

NOV     2116 – 25                                               MAR   172.65 – 1.10

JAN      2124 – 25                                               MAY   173.75 – 1.10

MAR     2138 – 25                                                JUL   174.55 – 1.15

MAY     2154 – 25                                                SEP   175.25 – 1.20