Coffee Market Report June 22 2017

The coffee markets aside from the clearing of the books on the part of the trade and industry of their prompt July contract positions within the New York market ahead of first notice day for the contract, were in receipt of nothing in the way of news or excitement yesterday.   But with the continued speculative pressure upon this market that has seen the arbitrage between the New York and London markets narrow to its lowest value for over forty-two months, being perhaps the other notable factor for the day. 

The big question for the present and one that is very much on the lips of the arabica coffee producers in general, is when might it be that the New York market could be seen to be oversold by the short sold speculative sector of the market, which might trigger a profit taking liquidation of some of their short positions and with buy stops being triggered, a possible sharp upside correction in value.  Albeit that to a degree, the selloff within the New York market is being influenced by and is somewhat in line with the generally soft nature of the overall macro commodity index in general. 

In terms of weather and the Brazil winter the short-term forecasts are not frost threatening for the coming week, but there is still the traditionally higher risk period around the time of the next full moon on the 9th. July to the fore.   It is however in terms of the general climatic conditions for the main Brazil coffee districts in recent years, not really foreseen to be anything of a threat and for the present, weather is not really proving to be factor within the coffee markets.  

The September to September contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 28.07 usc/Lb., while this equates to a 23% 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 736 bags yesterday; to register these stocks at 1,515,258 bags.  There was meanwhile a larger in number 2,735 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 28,789 bags. 

The commodity markets had yet another dismal day yesterday, with the overall macro commodity index taking a softer track for the day.  The Copper, Corn and Gold markets nevertheless had a day of buoyancy and the London robust Coffee market was steady, while the Oil, Natural Gas, Sugar, Cocoa, New York arabica Coffee, Cotton, Orange Juice, Wheat, Soybean and Silver markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.06% lower, to see this Index registered at 388.70.  The day starts with the U.S. Dollar tending a little softer and trading at 1.267 to Sterling and at 1.117 to the Euro, while North Sea Oil is near to steady and is selling at $ 43.65 per barrel. 

The coffee markets started the day yesterday on a mixed note and with the London market showing some early buoyancy, while the New York market had a softer start for the day and soon followed by the London market dipping pack into negative territory.   The pressure upon the London market was however soon countered and the markets entered the early afternoon trade with the London market on par and the New York market remaining within negative territory.   As the afternoon progressed the London market started to pick up support and once more moved back into positive territory, while the New York market came under further pressure and fell deeper into negative territory and seemingly had some influence upon the London market that drifted back to trade around par and set the markets for a mixed closed for the day. 

The London market ended the day on a near to steady note and having recovered 80% of the earlier losses of the day by the close, while the New York market ended the day on a very soft note and with 92.7% of the earlier losses of the day intact.   This close paints a soft technical picture for the New York market but one would think that there might nevertheless be some degree of caution over the potentially oversold nature of the market, which might assist to see the markets due a hesitantly steady start for early trade today, against the prices set yesterday, as follows: 

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

JUL    2055 – 2                                              JUL     119.35 – 2.60 

SEP    2172 – 2                                              SEP    122.05 – 2.55

NOV   2056 unch                                           DEC   125.60 – 2.50

JAN    2031 + 2                                              MAR   129.10 – 2.45

MAR   2016 + 8                                              MAY   131.50 – 2.40

MAY   2013 + 9                                              JUL    133.75 – 2.35

JUL    2028 + 9                                              SEP    135.90 – 2.30

SEP    2044 + 9                                              DEC   138.65 – 2.40

NOV   2053 + 9                                              MAR   141.45 – 2.50

JAN    2060 + 9                                              MAY   143.05 – 2.50