Coffee Market Report November 24 2016

The Brazil weather reports continue to dampen market spirits, with good rains for the main coffee districts reported this week and forecasts indicating that there is not medium term threat of damaging weather to the fore.   This news accompanied by early forecasts for a reasonable medium sized new Brazil crop for next year that while not likely to be a significantly surplus new crop, it shall be one that shall guarantee steady Brazil coffee supply, through to the follow on 2018 crop. 

Meanwhile with the strong U.S. dollar in play and the corresponding weak Brazil Real, it is assisting to encourage internal market new crop arabica coffee sales and is likewise with the related price fixation hedge selling into the New York market, dampening speculative spirits within this market.   Thus contributing to the pre-Thanksgiving Holiday sell off within the market yesterday, which took a significant dip in value yesterday. 

The new crop harvest in Vietnam is now in full swing and with the reference prices of the London robusta coffee market still offering good value, there is active new crop robusta coffee selling within the internal market in Vietnam.   This is likewise with the related price fixation hedge selling into the London market, having some influence upon the London markets decline in value this week.  

Thus, for the present in terms of the coffee markets it is very much business as usual and with the new main Colombian crop in full swing and the overall larger new Mexican and Central American crop starting, there are no fears of short to medium term tightness in coffee supply, which is likely to further dampen speculative sentiment within the coffee markets.   But while there is presently speculative selling within the coffee markets in play and is contributing to the market demise, one might still question if this prevailing steady coffee supply scenario might have the same degree of influence upon the sentiment of the managed money and index funds, who take a longer-term view in terms of their investment into the coffee markets.  

The March to March contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 64.99 usc/Lb., while this equates to a 41.21% 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 increase by 2,475 bags yesterday; to register these stocks at 1,259,086 bags.  There was meanwhile a smaller in volume 778 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 14,705 bags. 

The commodity markets with a robust U.S. dollar in play had a generally softer day yesterday, with many in important U.S. markets starting to concentrate on today’s Thanksgiving Day holiday and with an extended long weekend for many, as the day progressed.   The Natural Gas, Cocoa, Copper and Orange Juice markets nevertheless had a day of buoyancy, while the Oil, Sugar, 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 0.29% lower; to see this Index registered at 419.51.   The day starts with the U.S. dollar near to steady and trading at 1.243 to Sterling and 1.054 to the Euro, while North Sea Oil is steady and is selling at 46.70 per barrel.

 The London and New York markets started the day yesterday on a softer note, with both markets taking a steady downside track into the afternoon trade and with the muscle of the U.S. dollar assisting to set the markets on this track for the rest of the day’s trade.   The London market ended the day on a soft note and with 86.9% of the earlier losses of the day intact, while the New York market ended the day on a very soft note and with 96.5% of the earlier losses of the day intact.    With the London market due to trade solo today while the New York market is closed for the Thanksgiving Day holiday one might expect little excitement for this market today, but one might think that with price fixation selling in play and following the dismal end for the New York market yesterday, that there might be a further softening in value due for early trade today against the prices set yesterday, as follows: 

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

NOV     2074 – 52                                               DEC   154.65 – 2.60

JAN      2046 – 53                                              MAR   157.70 – 4.15

MAR     2044 – 45                                              MAY   160.10 – 4.10

MAY     2052 – 44                                                JUL   162.20 – 4.10

JUL      2057 – 44                                                SEP   164.05 – 4.10

SEP      2060 – 47                                               DEC   166.65 – 4.05

NOV     2061 – 52                                               MAR   169.10 – 3.95

JAN      2068 – 53                                               MAY   170.25 – 3.90

MAR     2080 – 55                                                JUL   171.25 – 3.90

MAY     2096 – 55                                                SEP   172.05 – 4.00