Coffee Market Report October 18 2016

The latest Commitment of Traders report from the New York arabica coffee market has seen the shorter term in nature Managed Money fund sector of this market decrease their net long position within the market by 5.26% over the week of trade leading up to Tuesday 11th. October; to register a net long position of 36,351 Lots.   Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 0.31%, to register a net long position of 38,375 Lots on the day. 

Over the same week the Non Commercial Speculative sector of this market decreased their long position within the market by 2.09%, to register net long position of 31,306 Lots.   This net long position which is the equivalent of 8,875,112 bags is most likely to have since been increased, following the period of overall more positive trade that has since followed and likewise, that of the Managed Money fund sector of the market. 

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 5.97% during the week of trade leading up to Tuesday 11th. October; to register a long position of 33,728 Lots.  This net long position which is the equivalent of 5,621,333 bags has most likely been since increased, following the period of overall more positive trade that has since followed. 

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks increased by 913 bags or 0.01% during the month of September, to register these stocks at 6,199,023 bags at the end of the month.   These stocks do not of course include the in transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is fed by these stocks of 560,000 bags per week, would conservatively have been at least 1.1 million bags. 

Therefore, if one is to consider the additional unreported stocks and look to end September stocks in North America of approximately 7.3 million bags, it would have equated to something in the order of 13 weeks of roasting activity.  This number remains a safe reserve, in terms of the steady flow of new crop arabica coffees from Brazil that are already coming to the market and soon to be followed, by the new crop arabica coffees from Colombia and Central America, along with the new crop robusta coffees from Vietnam.  

The erratic nature of the early summer rains over the main Brazil coffee districts so far and while not yet threatening for the prospects of the next 2017 crop, have come to the fore in trade yesterday, to assist to buoy the fortunes of the New York market.  However, while supportive for the market it is a somewhat fragile factor and not yet really a fundamental reason for support, as there are forecasts for improved rains in the coming month, which would tend to eliminate fears of damage to the potential of the next Brazil crop.  

The March to March contracts arbitrage between the London and New York markets broadened yesterday, to register this at 64.93 usc/Lb., while this equates to a 40.44% price discount for the London robusta coffee market.  This arbitrage is perhaps becoming a less 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 5,376 bags yesterday; to register these stocks at 1,272,451 bags.  There were meanwhile a smaller in number 2,737 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 26,261 bags. 

The commodity markets selectively continued to encounter the negative pressure of a near to steady relatively strong U.S. dollar yesterday, which continued to impact within many markets but not sufficiently so, to stop the overall macro commodity index from taking a near to steady track for the day.   The Sugar, Coffee, Cotton, Orange Juice, Wheat, Soybean, Gold and Silver markets had a day of buoyancy, while the Oil, Natural Gas, Cocoa, Copper and Corn 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 418.68.   The day starts with the U.S. dollar steady and trading at 1.223 to Sterling and 1.101 to the Euro, while North Sea Oil is showing a degree of buoyancy in early trade and trading at 49.85 per barrel. 

The London market started the day yesterday with hesitant buoyancy, while the New York market started the day on a near to steady note and with the markets maintaining this stance into the early afternoon trade, when the London market started to pick up some value and the New York market moved into modest positive territory.  This positive stance seemingly inspired confidence and with only light producer price fixation selling pressure over the markets, both market started to attract buy stops and to take a steady upside track for the rest of the day’s trade.   The London market continued to end the day on a positive note and with 85.4% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 94.6% of the earlier gains of the day intact.   This relatively robust close and along with a positive picture that it brings to the charts, is likely to inspire a degree of confidence and to set the markets for a steady start for early trade today against the prices set yesterday, as follows: 

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

NOV     2086 + 42                                               DEC   157.10 + 1.70

JAN      2109 + 35                                              MAR   160.55 + 1.75

MAR     2108 + 34                                              MAY   162.55 + 1.65

MAY     2108 + 35                                                JUL   164.50 + 1.70

JUL      2108 + 35                                                SEP   166.20 + 1.75

SEP      2111 + 35                                               DEC   168.55 + 1.85

NOV     2119 + 35                                               MAR   170.50 + 1.85

JAN      2129 + 35                                               MAY   171.55 + 1.85

MAR     2136 + 35                                                JUL   172.55 + 1.90

MAY     2139 + 35                                                SEP   173.50 + 1.90