Coffee Market Report May 31 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 increase their net short sold position within the market by 21.38% over the week of trade leading up to Tuesday 23rd. May; to register a new net short-sold position of 15,834 Lots.   Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 0.48%, to register a net long position of 33,928 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market increased their net short sold position within this market by 21.4%, to register a net short sold position of 15,986 Lots.  This net short sold position which is the equivalent of 4,531,960 bags and following the period of mixed but overall more positive trade that has since followed, has most likely been marginally reduced and likewise, that of the Managed Money fund sector of the market. 

The Uganda Coffee Development Authority UCDA has reported that the countries coffee exports for the month of April were 561 bags or 0.17% lower than the same month last year, at a total of 326,232 bags.  This steady performance and following a much-improved performance in the previous months, has contributed to the countries cumulative coffee exports for the first seven months of the present October 2016 to September 2017 coffee year to being 583,665 bags or 29.24% higher than the same period in the previous coffee year, at a total of 2,579,472 bags.  

In terms of value the UCDA has reported that the coffee exports for the month of April were US$ 8,241,962.00 or 26.48% higher than the same month last year, at a total of US$ 39,362,589.00.  This having contributed to the cumulative value for the first seven months of the present October 2016 to September 2017 coffee year to be US$ 120,483,291.00 or 65.53% higher than the same period in the previous coffee year, at a total of US$ 313,148,422.00. 

These figures would start to indicate that the country is on its way to well exceed the volume of coffee exports of 3,315,567 bags that were registered for the previous October 2015 to September 2016 coffee year, during the present coffee year.    While the added value for the coffees being exported out of Uganda for the coffee year so far, does much to inspire further investment on the part of the Ugandan farmers into their coffee crops. 

There has been a report that the traditionally conservative Vietnam Coffee and Cocoa Association have referred to the many farms with relatively low yielding aged trees, to be reason to forecast that the forthcoming end of the year new coffee crop shall be a relatively modest 23.3 million bags.   This is however a figure that is not even close to the many private trade and industry forecasts and including the well-respected USDA report, which indicate a new crop that shall be approximately 10% higher than the last crop, at something close to 28.6 million bags. 

Thus, one might expect that this latest Vietnam Coffee and Cocoa Association report shall have little influence upon market sentiment, which is somewhat reflected by the inverted nature of the London market at present.   This market offering discounted prices for the delivery the year end delivery month and thereon, the first three delivery months of the coming year.    

The July to July contracts arbitrage between the London and New York markets broadened yesterday, to register this at 40.93 usc/Lb., while this equates to 30.98% price discount for the London robusta coffee market.  This arbitrage may nevertheless become 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 2,401 bags yesterday; to register these stocks at 1,472,176 bags.  There was meanwhile a smaller in number 771 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 47,962 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 7,167 bags or 0.25% in the week of trade leading up to Monday 29th. May, to register these stocks at 2,808,500 bags, on the day. 

The commodity markets returned from a long weekend yesterday but with the Chinese market still closed for the Dragon Boat holiday with many markets on a back foot for the day and with the overall macro commodity index, taking a softer track for the day.  The Cocoa, Coffee and Silver markets had a day of buoyancy, while the Oil, Sugar, Copper, Corn, Wheat and Gold markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.41% lower, to see this Index registered at 407.76.  The day starts with the U.S. Dollar steady and trading at 1.278 to Sterling and at 1.117 to the Euro, while North Sea Oil is near to steady and is selling at $ 50.90 per barrel. 

The London and New York markets started the day yesterday trading at close to par and maintaining a sideways track, into the early afternoon trade.   As the afternoon progressed the New York market started to show some buoyancy and followed by buoyancy for the London market, but with both markets coming off their highs of the day in late trade.   The London market ended the day on a positive note and with 55.9% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 58.1% of the earlier gains of the day intact.   This close tends to paint something of a positive technical picture for the markets, but one might expect some degree of caution and little better than a steady start for early trade today against the prices set yesterday, as follows: 

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

MAY    1989 + 28

JUL     2010 + 19                                          JUL     132.10 + 0.90

SEP     2024 + 22                                          SEP    134.40 + 0.85

NOV    2018 + 21                                          DEC    137.95 + 0.90

JAN     2008 + 21                                          MAR   141.35 + 0.90

MAR    2000 + 19                                          MAY   143.60 + 0.95

MAY    1999 + 19                                          JUL    145.80 + 1.00

JUL     2014 + 19                                          SEP    147.80 + 1.05

SEP     2028 + 19                                          DEC   150.20 + 1.00

NOV    2035 + 19                                         MAR    152.60 + 1.00