Coffee Market Report April 25 2017

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 and liquidate their net short sold position within the market by 726.91% over the week of trade leading up to Tuesday 18th. April; to register a new net long position of 5,078 Lots.   Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 5.81%, to register a net long position of 32,178 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market increased their long position within the market by 162.96%, to register net long position of 10,544 Lots.   This net long position which is the equivalent of 2,989,177 bags and following the sharp selloff last week, has most likely been liquidated and with this sector of the market once again within a new net short sold position 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 decrease their net long position within this market by 4.64% during the week of trade leading up to Tuesday 18th. April; to register a net long position of 46,769 Lots.  This net long position which is the equivalent of 7,794,833 bags has most likely been significantly reduced, following the period of overall sharply softer trade that has since followed. 

It has been a good year so far for the Ugandan coffee farmers as following on from the report that the countries coffee exports for the first six months of the new October 2016 to September 2017 coffee year were 584,176 bags or 35% higher than the same period in the previous coffee year at a total of 2,253,190 bags, the value of these exports were a significant $ 112,241,330.00 or 69.48% higher than the same period, at a total of $ 273,785,834.00. 

This increased value even more significant in terms of the fact that it is related mostly towards the lower value robusta coffee exports which increased in volume over these six months by 38.46%, as against the more modest 26.23% increase in arabica coffee exports.   The ratio of these six months of Ugandan coffee exports having been 73.57 robusta coffee to 26.43 arabica coffees, in volume terms.  Albeit that the arabica coffees contributed to 32% of the value of the exports for the period.  

The coffee markets are meanwhile very much on the back foot for the present and with the fundamental of short to medium term deficit supply being countered by the evidence of significant consumer market stocks, which confirm that there is no threat of tight short term coffee supply.  Especially so with the prevailing weather reports and forecasts, indicating no threat to the prospects for improved production levels for the coming year.   This turning the speculative and fund sentiment towards the markets somewhat bearish and with follow through selling coming into play, as the markets progressed through the day yesterday.   

The July to July contracts arbitrage between the London and New York markets broadened yesterday, to register this at 44.08 usc/Lb., while this equates to 33.42% price discount for the London robusta coffee market.  This still relatively low 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 1,815 bags yesterday; to register these stocks at 1,409,693 bags.  There was meanwhile a larger in number 2,620 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 22,077 bags. 

The commodity markets while mixed in trade remained mostly on the downside track yesterday, with the overall macro commodity index taking a softer track for the day.   The Natural Gas, Copper, Orange Juice and Grain markets had a day of buoyancy and the Silver market was steady, while the Oil, Sugar, Cocoa, Coffee and Gold markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.59% lower, to see this Index registered at 407.17.  The day starts with the U.S. Dollar near to steady and trading at 1.279 to Sterling and at 1.086 to the Euro, while North Sea Oil is showing some early corrective buoyancy and is selling at $ 49.70 per barrel. 

The London market started the day yesterday on a softer note, but with the New York market following a brief opening dip in value, taking a positive stance.  The markets progressed into the early afternoon trade with the London market remaining south of par and the New York market on a positive track and peaking with a 1.45 usc/Lb. gain for the day, but as the afternoon progressed the New York market started to falter and slipping back to trade either side of par.   The inability of the New York market to build on its gains did little to assist the confidence within the London market that attracted further selling pressure, while the New York took a late in the day downside track into negative territory.   

The London market ended the day on another very soft note and with 62.8% of the earlier losses of the day intact, while the New York market ended the day on a soft note and with 80% of the losses of the day intact.   This close and with the New York market having lost its way in late trade does little to inspire confidence, but one might nevertheless expect to see some caution coming into play in early trade and possibly a hesitant near to steady start for the day against the prices set yesterday, as follows: 

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

MAY     1906 – 56                                              MAY   129.50 – 0.35

JUL      1936 – 54                                              JUL    131.90 – 1.00

SEP      1953 – 53                                             SEP    134.25 – 1.00

NOV     1960 – 52                                              DEC   137.85 – 1.00

JAN      1962 – 53                                             MAR   141.30 – 1.00

MAR     1963 – 49                                             MAY   143.50 – 0.95

MAY     1964 – 40                                              JUL    145.55 – 0.95

JUL      1971 – 39                                              SEP    147.55 – 0.90

SEP      1979 – 39                                              DEC   149.90 – 1.00

NOV     1986 – 39                                              MAR   152.15 – 1.05