Coffee Market Report April 24 2017

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 162.96% during the week of trade leading up to Tuesday 18th. April; to register a net long position of 10,544 Lots on the day.  This net long position which is the equivalent of 2,989,177 bags has most likely been liquidated and with this sector of the market back into a net short sold position, following the rather dramatic reversal of fortunes that the market has experienced in trade for the second half of last week. 

The Uganda Coffee Development Authority UCDA has reported that the countries coffee exports for the month of March were 162,078 bags or 65.4% higher than the same month last year, at a total of 409,916 bags.  This much-improved performance has contributed to the countries cumulative coffee exports for the first six months of the present October 2016 to September 2017 coffee year to being 585,040 bags or 35.05% higher than the same period in the previous coffee year, at a total of 2,254,094 bags.  

The UCDA has forecasted that the present surge in imports shall continue with an improved import performance for the month of April, but fear that due to the partial drought conditions that were experienced over the last quarter of last year and into early this year, that it shall impact negatively upon the relative export volumes in the coming months.   However, with such a good performance so far, one would guess that the countries coffee exports for the present coffee year shall still well exceed the 3,315,567 bags that the country exported during the previous coffee year. 

These previous coffee year exports having been a ratio of 73.45 to 26.55 of robusta and arabica coffee exports, which saw Uganda retain its dominant hold the number on position in terms of African robusta coffee exports, while coming second to the dominant Ethiopian share, in terms of African arabica coffee exports.  While with a good number of private trade, NGO and state coffee farm extension programs active in Uganda, one would foresee that with unforeseen weather problems aside that the countries coffee production and exports are on track for steady year by year increases for the coming years.   

It was a dramatic day for the London robusta coffee market on Friday and while there was a negative correction expected following the reversal in the fortunes of the New York market late in the day on Thursday, few foresaw the speculative sell off that came to the market later in the day on Friday.  This saw the London market with prices slipping below the 200-day moving average and with extensive volumes of trade, experience its largest one day slip in prices in six years. 

The July to July contracts arbitrage between the London and New York markets broadened on Friday, to register this at 42.64 usc/Lb., while this equates to 32.08% price discount for the London robusta coffee market.  This relatively narrow arbitrage remains not such 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 2,850 bags on Friday; to register these stocks at 1,407,878 bags.  There was meanwhile a smaller in number 380 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 24,697 bags. 

The commodity markets were mixed but with most markets on a back foot on Friday, with the overall macro commodity index taking a negative track for the day.   The Sugar, Cocoa, Cotton, Soybean and Gold markets nevertheless had a day of buoyancy, while the Oil, Natural Gas, Coffee, Copper, Orange Juice, Wheat, Corn and Silver markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.30% lower, to see this Index registered at 409.58.  The day starts with the U.S. Dollar near to steady and trading at 1.278 to Sterling and at 1.085 to the Euro, while North Sea Oil is showing some early buoyancy and is selling at $ 50.30 per barrel. 

The London market started the day on Friday on a predictable softer note, while the New York market started the day marginally softer.   The New York market did however very quickly move back into corrective positive territory and followed by a recovery of more than half of the earlier losses experienced by the London market and with the New York market taking a positive track into early afternoon trade, which was accompanied by a relatively modest stance being taken by the London market.    However, as the afternoon progressed the New York market faltered and slipped back into modest negative territory, while the London market once again slipped lower and started to attract speculative liquidation sell stops and started on a dramatic sharp downside track for the day.  Albeit that there was some modest partial recovery for the New York market, at the close of trade for the day.   

The London market ended the day on an extremely soft note and with 91.2% of the losses of the day intact, while the New York market ended the day on a soft note and with 50.1% of the earlier losses of the day intact.  This close that came with extremely high volumes of trade has taken the markets well south of the recent trading range and does little to inspire confidence, as it also contributes to a negative picture for the charts, but one might expect that there might nevertheless be some degree of corrective buying and perhaps a degree of buoyancy for early trade today against the prices set on Friday, as follows: 

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

MAY     1962 – 136                                            MAY   129.85 – 1.80

JUL      1990 – 134                                            JUL    132.90 – 1.40

SEP      2006 – 132                                           SEP    135.25 – 1.45

NOV     2012 – 131                                            DEC   138.85 – 1.40

JAN      2015 – 125                                           MAR   142.30 – 1.35

MAR     2012 – 124                                           MAY   144.45 – 1.35

MAY     2004 – 134                                            JUL    146.50 – 1.30

JUL      2010 – 134                                            SEP    148.45 – 1.25

SEP      2018 – 134                                            DEC   150.90 – 1.10

NOV     2025 – 134                                            MAR   153.20 – 1.00