Coffee Market Report December 27 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 12.67% during the week of trade leading up to Tuesday 20th. December; to register a net long position of 14,817 Lots on the day.  This net long position which is the equivalent of 4,200,554 bags has most likely been further decreased, following the period of sharply lower trade, which has since followed. 

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative Non-Commercial sector of this market increase their net long position within this market by 16.74% during the week of trade leading up to Tuesday 20th. December; to register a long position of 33,500 Lots.  This net long position which is the equivalent of 5,583,333 bags has most likely been little changed to perhaps marginally reduced, following the period of mixed but overall more negative trade that has since followed. 

The Coffee Board of India have lowered their new October 2016 to September 2017 coffee supply forecast by 1.03% to now foresee a coffee supply for this coffee year to be 5,278,333 bags, with the negative adjustment being related to their perspective for a smaller than expected new arabica coffee crop.  This arabica coffee crop now being forecasted at 1,603,333 bags, as against their now improved forecast for a new robusta coffee crop of 3,675,000 bags.   

The European Coffee Association have announced that the port warehouse coffee stocks in Europe decreased by 38,100 bags or 0.32% during the month of October, to register these port warehouse stocks at 11,758,200 bags as at the end of the month.    These stocks do not however include the in-transit bulk container coffee stocks that were within Europe at the time, stocks being held within non-reporting private warehouses and the on-site roaster inventory stocks, which would most likely have been in excess of 2 million bags at the time.   

Thus, with the combination of West and Eastern European coffee consumption being approximately 1 million bags per month, one might suggest that the European coffee stocks at the end of October would have been the equivalent of approximately 13.5 weeks of roaster demand.   This with the forthcoming impact of the new Central American, Colombian and Vietnam coffee crops, would prove to be a very safe number and one that could be seen to be somewhat bearish for market sentiment.  

The March to March contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 41.39 usc/Lb., while this equates to a 30.40% price discount for the London robusta coffee market.  This narrowing arbitrage is now becoming less of 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 1,270 bags on Friday; to register these stocks at 1,262,632 bags.  There was meanwhile a larger in number 7,073 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 28,485 bags. 

The commodity markets had another mixed day ahead of the Christmas long weekend on Friday, but with the overall macro commodity index taking a relatively steady track for the day.   The Oil, Natural Gas, Sugar, Cocoa, London robusta Coffee, Wheat, Corn, Soybean and Gold markets had a day of buoyancy, while the New York arabica Coffee, Cotton, Copper, Orange Juice and Silver markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.28% lower; to see this Index registered at 414.78.   The day starts with the U.S. dollar steady and trading at 1.227 to Sterling and 1.044 to the Euro, while North Sea Oil is steady and is selling at $ 53.95 per barrel. 

The New York and London markets started the day on Friday on a steady note, but with the London market soon picking up some support and starting on a positive track, while the New York market dipped back into negative territory.  The New York market did however soon recover and both markets took a positive track into the early afternoon trade, but while the London market shrugged off negative pressure that was coming into play and assisted by a lack of producer selling activity and took positive track towards its early close for the day, the New York market once again faltered and came under further selling pressure to take s negative track for late trade.   The London market ended the day on a positive note and with 96.2% of the gains of the day intact, while the New York market ended the day on a very soft note and with 93.6% of the losses of the day intact.   This close while doing little to inspire confidence for the New York market might though bring to the fore the perception that the New York market is now somewhat oversold and while the London market remains on holiday for today, the New York market trading solo might well be due for some degree of buoyancy for early trade today against the prices set on Friday, as follows: 

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

JAN      2103 + 27

MAR     2089 + 25                                               MAR   136.15 – 2.95

MAY     2095 + 24                                               MAY   138.40 – 2.95

JUL      2099 + 22                                               JUL     140.70 – 2.95

SEP      2104 + 23                                              SEP     142.65 – 2.90

NOV     2106 + 23                                               DEC    145.65 – 2.80

JAN      2106 + 23                                               MAR   148.35 – 2.80

MAR     2109 + 23                                               MAY   150.05 – 2.75

MAY     2116 + 22                                               JUL    151.65 – 2.75

JUL      2128 + 21                                               SEP    153.40 – 2.65