Coffee Market Report June 19 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 13.52% during the week of trade leading up to Tuesday 13th. June; to register a net short sold position of 30,665 Lots on the day. This net short-sold position which is the equivalent of 8,693,392 bags has most likely been further increased, following the mixed but overall more negative trade that has since followed. 

The respected United States Department of Agriculture Foreign Agricultural Service have reported that despite their forecast for a smaller new Brazil crop this year of 52.1 million bags, that they foresee global coffee supply for the coming October 2017 to September 2018 coffee year to be approximately 159 million bags.  The dip in Brazil coffee production this year they report, shall be countered by increased coffee supply from the producer bloc of Mexico and Central America, Vietnam, Indonesia and India. 

The report does however also foresee global coffee consumption to be only marginally lower than coffee supply, at 158 million bags.   While the report forecasts declining global coffee stocks in the coming months, which shall tighten up coffee supply for the coming year.   Albeit that the forecasted decline in stocks is a relatively marginal 3.13% decline, to 34 million bags due to be carried over into the forthcoming coffee year. 

What is perhaps important to note from the report, is the view from the USDA that the world’s leading robusta coffee supplier Vietnam shall on the basis of robusta coffee exports since the small crop that was harvested over October 2016 to January 2017, have negligible carryover stocks of 1.2 million bags into what they foresee to be a 1.9 million bags larger new crop of 28.6 million bags, due at the end of this year.   This factor they foresee, shall result in 1 million bags decline in Vietnams coffee exports for the coming October 2017 to September 2018 coffee year, which they forecast at 24 million bags. 

Meanwhile the relatively tight supply of robusta coffees to support new business out of Vietnam continued to provide fundamental support for sentiment within the London market on Friday, which saw the market buck the negative influences of the softening value of the New York market.   To see the London market experiencing another positive day and with prices having rallied, to new two month highs and the arbitrage between the London and New York markets narrowing further.  

The September to September contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 29.56 usc/Lb., while this equates to 23.47% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 2,759 bags on Friday; to register these stocks at 1,517,088 bags.  There was meanwhile a larger in number 4,855 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 17,321 bags. 

The commodity markets had a mixed day on Friday, to see the overall macro commodity index taking something of a sideways track for the day.  The Oil, London robusta Coffee, Wheat, Corn, Soybean and Gold markets had a day of buoyancy, while the Natural Gas, Sugar, Cocoa, New York arabica Coffee, Cotton, Copper, Orange Juice and Silver markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.04% higher, to see this Index registered at 398.27.  The day starts with the U.S. Dollar steady and trading at 1.276 to Sterling and at 1.119 to the Euro, while North Sea Oil is near to steady in early trade and is selling at $ 45.75 per barrel. 

The London market and New York markets started the day on Friday with early buoyancy and with both markets holding steady in positive territory, into the early afternoon trade.   As the day progressed though the New York market started to falter and with sell stops being triggered to accentuate the losses, to suffer from a collapse and to slip by 4 usc/Lb. deeply back into negative territory.  The London market came under some degree of pressure but nevertheless managed to remain well within positive territory, while the New York market recovered some of the rather dramatic losses of the day. 

The London market ended the day on a positive note but with only 45.5% of the earlier gains of the day intact, while the New York market ended the day on a very negative note and with 77.8% of the earlier losses of the day intact.   This close does little to inspire but one might expect that with the news of the extended speculative net short sold position with the New York market that it might bring some degree of caution into play and to set the markets for perhaps a steady start for the London market and a degree of buoyancy for the New York market for early trade today, against the prices set on Friday, as follows: 

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

JUL    2109 + 19                                            JUL     123.55 – 2.25 

SEP    2125 + 20                                            SEP    125.95 – 2.10

NOV   2097 + 17                                            DEC    129.35 – 2.10

JAN    2062 + 18                                            MAR   132.80 – 2.10

MAR   2035 + 17                                            MAY   135.10 – 2.05

MAY   2031 + 15                                            JUL    137.30 – 2.05

JUL    2046 + 15                                            SEP    139.40 – 2.05

SEP    2056 + 15                                            DEC   142.05 – 1.95

NOV   2065 + 15                                            MAR   144.65 – 1.90

JAN    2072 + 15                                            MAY   145.75 – 1.90