Coffee Market Report October 25 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 increase their net long position within the market by 18.54% over the week of trade leading up to Tuesday 18th. October; to register a net long position of 43,089 Lots.   Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 1.59%, to register a net long position of 38,984 Lots on the day. 

Over the same week the Non-Commercial Speculative sector of this market increased their long position within the market by 24.7%, to register net long position of 39,040 Lots.   This net long position which is the equivalent of 11,067,667 bags is most likely to be little changed to perhaps marginally lower, following the period of mixed but overall near to steady 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 0.39% during the week of trade leading up to Tuesday 18th. October; to register a long position of 33,858 Lots.  This net long position which is the equivalent of 5,643,000 bags has most likely been little changed, following the period of mixed but overall steady trade that has since followed. 

The National Coffee Board in Peru who have reported that they anticipate that this year’s coffee harvest shall prove to be approximately 4.6 million bags of mostly fine washed arabica coffee, which is a number that is significantly higher than many earlier trade forecasts.  But added to this and with improved weather conditions for the countries coffee districts and with reports of splendid flowering towards the development of the next crop, they have forecasted that next year’s new crop that starts being harvested during the second quarter of 2017, might be as much as 25% higher and quote a forecast of 5.75 million bags.  

This rather positive figure if it proves to be true and with increased overall production being forecasted for the Mexican and Central American fine washed arabica producer bloc and likewise for Colombia, would most certainly underpin the perspective that the medium to longer term mild coffee supply is secure.   But with continued concern being voiced over the longer-term supply of natural arabica supply due to the possibility of a biennially bearing lower Brazil crop for next year and the similar concerns over longer-term robusta coffee supply, which would come with a smaller new crop that is forecasted from Vietnam over the coming couple of months.   Thus, for the present, the latest news from Peru has had little in the way of negative influence upon the prevailing positive nature of the coffee markets. 

There are still bouts of rainfall over the main central highlands coffee districts in Vietnam, which are delaying the start of the new crop harvest.   But forecasts are for the rain season to taper off by early next month and with this, to see the new crop harvest start to bring good volumes of new crop robusta coffees to the mills by the end of the month.   In the meantime, and with exporters still holding reasonable volumes of past crop robusta coffee stocks, they are able to continue to fulfil their forward sold export commitments for the rest of the year.   While with the prevailing three year high internal market prices, one would imagine that there shall be less in the way of internal market price resistance and that a good flow of new crop robusta coffees shall come in time for the exporters to maintain a steady supply into the new year.   

The March to March contracts arbitrage between the London and New York markets broadened yesterday, to register this at 63.38 usc/Lb., while this equates to a 39.27% 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 decrease by 1,403 bags yesterday; to register these stocks at 1,275,509 bags.  There were meanwhile a larger in number 3,300 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 23,343 bags. 

The commodity markets continued to encounter the negative influence of the renewed muscle of the U.S. dollar yesterday, to see the overall macro commodity index taking a sideways track the day.  The Sugar, Coffee, Copper, Orange Juice, Soybean and Silver markets had a day of buoyancy, while the Oil, Natural Gas, Cocoa, Cotton, Wheat, Corn and Gold markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.31% higher; to see this Index registered at 419.97.   The day starts with the U.S. dollar near to steady and trading at 1.222 to Sterling and 1.088 to the Euro, while North Sea Oil is steady and trading at 50.10 per barrel. 

The London market started the day yesterday on a softer note, while the New York started the day with a degree of buoyancy and with both markets taking this track into the early afternoon trade, when the New York market started to attract further support and with buy stops being triggered, to accelerate the gains.   The New York market did however soon hit something of a ceiling, while the London market steadily recovered and while the New York market came off its highs the London market took a modestly positive sideways track through to the close.   The London market ended the day on a positive note and with 80% of the earlier gains of the day intact, while the New York market ended the day on a positive note and with 58.1% of its more substantial gains of the day intact.   This close one would suspect shall inspire some cautious confidence and with a strong Brazil Real now at 3.12 to the dollar likely to mute Brazilian fixation selling activity later in the day, 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     2132 + 4                                                 DEC   157.90 + 1.80

JAN      2161 + 8                                                MAR   161.40 + 1.80

MAR     2161 + 8                                                MAY   163.65 + 1.85

MAY     2161 + 8                                                  JUL   165.55 + 1.85

JUL      2162 + 8                                                  SEP   167.30 + 1.85

SEP      2165 + 7                                                 DEC   169.60 + 1.85

NOV     2166 + 1                                                 MAR   171.50 + 1.90

JAN      2158 – 15                                               MAY   172.50 + 1.95

MAR     2165 – 15                                                JUL   173.45 + 1.95

MAY     2168 – 15                                                SEP   174.35 + 1.95