Coffee Market Report May 22 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 short sold position within the market by 22.05% during the week of trade leading up to Tuesday 16th May; to register a net short sold position of 13,168 Lots on the day. This net short-sold position which is the equivalent of 3,733,069 bags has most likely been little changed to perhaps marginally decreased, following the mixed but overall buoyant trade that has since followed.
The well-respected United States Department of Agriculture Foreign Agricultural Service have published their report on the Guatemala coffee crop within which they have forecasted that coffee production has registered a year on year decline, attributed to the slow recovery of coffee plantations from rust (roya) epidemic four years ago, whereas the latest lower production forecast is attributed to drought induced conditions during crop development. Their latest forecast for the Guatemala coffee crop for the current October 2016 to September 2017 is for 3.16 million bags, of which green bean exports are forecast to be 2.90 million bags over the same period.  The USDA’s first estimate for the next coffee crop to start harvest in October 2017 is for production at 3.10 million bags and exports for the October 2017 to September 2017 coffee year to reach 2.80 million bags.
The well-respected United States Department of Agriculture Foreign Agricultural Service have published their report on the Brazil crop for the July 2017 to June 2018 coffee year, which they foresee to be biennially lower year on year, at 52.10 million bags.  The forecast details an estimate of 40.5 million bags for arabica production and 11.60 million bags forecast for robusta production.  Thus, with the addition of their beginning stocks estimated at 5.4 million bags, total coffee green coffee supply for the coming year at 57.5 million bags.  In addition to the production and carryover stocks, the report reflects 29.4 million bags estimated for prospective green bean exports to consumer markets over the same period, a relatively stable 3.6 million bags of green bean equivalent in value added export soluble and roast and ground products, to total 33 million bags of estimated coffee usage, whereas the very important local Brazil consumer market is estimated to be growing at a steady pace, the forecast at 20.66 million bags local consumption over the same time.  These estimates are very much in line with other private trade and industry forecasts and while there is still some time ahead, the potential for lower than usual internal carryover coffee stocks into the next Brazil biennial bearing larger crop harvest to come in June 2019 could meanwhile inspire a degree of speculative interest and volatility in the markets as the year progresses toward this next crop flowering and further along cherry development phase in the months to come.
The July to July contracts arbitrage between the London and New York markets widened on Friday, to register this at 42.42 usc/Lb., while this equates to 32.12% 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 4,741 bags on Friday; to register these stocks at 1,449,055 bags.  There were meanwhile 1,593 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 42,587 bags.
The commodity markets had a mixed but overall positive day on Friday, in a continuation of U.S. Dollar volatility and a higher day for the leading in influence, oil markets.   It was a positive day across the board with the exception of Cotton, Robusta Coffee, Orange Juice and Palladium finishing on a softer noted. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.93% higher, to see this Index registered at 413.30.  The day starts with the U.S. Dollar steady and trading at 1.299 to Sterling and at 1.118 to the Euro, while North Sea Oil is showing some degree of buoyancy and selling at $ 53.24 per barrel.
 
The London and New York markets started the day mildly softer in London and with a degree of buoyancy in New York.  The morning session in both markets setting a positive track, with London turning moving back to par and into positive territory as the day progressed.  The market attention to the dramatic turn of events for the Brazil Real witnessed the day before, appeared to dissolve as U.S. Dollar weakness took to the stage, to provide a boost in general to developing economy currencies, including the Real.  The afternoon session in New York held within a narrow range and the latter part of the session, in positive range but off of the days’ highs in this market.  The London market similarly set a positive track for the afternoon but as the day drew to a close the volume of trade thinned and the close for this market, on a mildly softer note, to set the close in both markets on Friday, as follows;
LONDON ROBUSTA US$/MT                      NEW YORK ARABICA USc/Lb.
MAY    1951 –  7                                              
JUL     1977 –  7                                              JUL    132.10 + 2.45
SEP     1998 –  5                                             SEP    134.50 + 2.45
NOV     2006 – 6                                              DEC    137.90 + 2.40
JAN      2004 – 6                                              MAR   141.25 + 2.35
MAR     2001 – 6                                              MAY   143.50 + 2.35
MAY     2001 – 6                                              JUL    145.60 + 2.35
JUL      2021 – 6                                              SEP    147.45 + 2.30
SEP      2029 – 6                                              DEC   149.85 + 2.25
NOV     2036 – 6                                              MAR   152.25 + 2.25