Coffee Market Report March 27 2017

The latest Commitment of Traders report from the New York arabica coffee market has seen the Non-Commercial Speculative sector of this market increase their net long position within the market by 24.15% during the week of trade leading up to Tuesday 21st. March; to register a net long position of 13,637 Lots on the day.  This net long position which is the equivalent of 3,866,029 bags has most likely been reduced again, following the period of mixed but overall negative trade, which has since followed. 

The International Coffee Organisation have reported that the global coffee exports for the month of February were a marginal 0.1% higher than the same month last year, at a total of 9.71 million bags.  This increase has contributed to the cumulative global coffee exports for the first five months of the present October 2016 to September 2017 coffee year to have been 6.7% higher than the same period in the previous coffee year, at a total of 49.52 million bags. 

These cumulative global coffee exports were seen to have been a 35.92 to 64.08 ratio of robust and arabica coffees, which is a relatively small share for the robusta coffees that had seen these price competitive coffees steadily increasing market share over the past few years.   But it is a reflection of the prevailing relatively tight robusta coffee supply, which has seen low grade arabica coffees starting to supplement robusta coffees within many price sensitive blends within the consumer markets. 

A report has come to the fore that the Colombian Coffee Federation intend to propose to the Colombian congress that the present coffee farmers levy of the equivalent of 6 usc/Lb. on their coffee, be increased by 25% to the equivalent 7.50 usc/Lb.  This increase they say is required so as to continue to fund the present farm renovation program that has in the past few years, assisted to steadily increase the countries annual coffee production, while they note that some of this increase would also to applied to support the coffee farmers pension fund.   

One might comment that it is a relatively modest increase in terms of the overall coffee price and one that is directly for the benefit of the farmers and therefore, one might not expect that such an increase would have much in the way of negative impact upon the Colombian coffee farmer’s sentiment towards the Federation.   Making note that the Colombian government and the Colombian Coffee Federation also provide coffee price support to the farmers, at times that the international coffee prices force domestic prices into loss making territory and do by nature, gain the respect of the farmers. 

Despite the relatively attractive robusta coffee prices at present, the Ivory Coast has reported something of a slow start to their coffee exports for this year, with the country’s exports for the first two months of this year reported to be 33.72% lower than the same period last year, at a total of only 108,300 bags.   This is a relatively modest number in terms of the expectations for exports for this year of approximately 1.3 million bags, but one might expect that with new crop coffees coming to the port warehouses, that the export volumes shall steadily start to increase.  

The May to May contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 40.58 usc/Lb., while this equates to 29.49% 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 4,370 bags on Friday; to register these stocks at 1,350,211 bags.  There was meanwhile a larger in number 10,205 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 50,574 bags. 

The commodity markets were mixed and generally tending softer on Friday, to see the overall macro commodity index taking a softer track for the day.   The Oil, Natural Gas, Gold and Silver markets had a day of buoyancy, while the Sugar, Cocoa, Coffee, Copper and Orange Juice markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.35% lower, to see this Index registered at 420.28.  The day starts with the U.S. Dollar losing a little more muscle and trading at 1.255 to Sterling and at 1.087 to the Euro, while North Sea Oil is tending softer and is selling at $ 49.75 per barrel. 

The London and New York markets started the day on Friday on a softer note, but with the London market soon picking up support and heading back into positive territory, while the New York market remained below par into the early afternoon trade.    The New York market breaking through the phycological 140 usc/Lb. mark started to attract sell stops and without sufficient industry buying under the market the losses were accentuated, while the London market started to attract selling pressure and to head back into negative territory.  The New York market tended to steady at the lows and to take a more modest negative track for the rest of the day, while the London market took a steady downside track through to the close.  The London market ended the day on a soft note and with 80% of the earlier losses of the day intact, while the New York market ended the day on a very soft note and with 85.3% of the earlier losses of the day intact.   This close tends to paint a negative technical picture for the markets, but one might think that there might be some degree of hesitant caution and a near to steady start due for early trade today against the prices set on Friday, as follows: 

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

MAR     2109 – 30

MAY     2139 – 24                                               MAY   137.60 – 2.90

JUL      2160 – 24                                               JUL    140.00 – 2.90

SEP      2172 – 23                                              SEP    142.40 – 2.85

NOV     2174 – 25                                               DEC   145.70 – 2.85

JAN      2166 – 26                                              MAR   148.90 – 2.90

MAR     2166 – 26                                               MAY   150.90 – 2.95

MAY     2169 – 26                                               JUL    152.65 – 2.95

JUL      2171 – 26                                               SEP    154.30 – 2.95

SEP      2179 – 26                                               DEC   156.35 – 3.00

NOV     2200 unch                                              MAR   158.40 – 3.05