Coffee Market Report June 26 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 16.41% during the week of trade leading up to Tuesday 20th. June; to register a net short sold position of 35,699 Lots on the day. This net short-sold position which is the equivalent of 10,120,508 bags has most likely been little changed to perhaps marginally increased, despite the sharp positive short covering correction in the market on Friday, which followed the previous day’s rather dramatic selloff. 

It was a day for the industry to watch the New York market from the sidelines of the field of play on Friday, with producers mostly withdrawn from what most consider to be an overly soft market and aside from stop loss price fixation on the part of roasters, very little in the way of industry buying aggression in play.   It was nevertheless a positive day for both markets, albeit that the Friday correction did not stop the markets from having an overall weaker week of trade. 

The question is what might be the direction to be set this week for the volatile New York market which remains with the negative influences upon speculative sentiment that come with the relatively high levels of consumer market coffee stocks at present, while the markets only really supportive fundamental is the smaller new arabica coffee crop in Brazil which is presently being harvested.   However, it is an arabica coffee crop that many have speculated shall nevertheless in terms of global arabica coffee stocks and future supply from the other producers, not prove to be a critical factor in terms of overall longer term global arabica coffee supply.  

Thus, it is yet to be seen if Friday’s somewhat anticipated correction that was due with the oversold nature of the New York market last week and a correction that set the market for its biggest one day gain in value for a year, shall be a pivotal day for the markets or just a start for a day or two of correction.    Suggesting that it shall encourage somewhat erratic trade for the York market this week, with players looking for some indication of direction and with the London market tending to mirror in a more modest manner, the direction that the New York market shall set.  

The September to September contracts arbitrage between the London and New York markets broadened on Friday, to register this at 28.74 usc/Lb., while this equates to a 23.37% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 5,355 bags on Friday; to register these stocks at 1,509,903 bags.  There were meanwhile a smaller in number 4,050 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 37,306 bags. 

The commodity markets had a more positive day to end the week on Friday and with the U.S. dollar marginally softer for the day, to see the overall macro commodity index taking a positive track for the day.   The Oil, Natural Gas, Sugar, Cocoa, Coffee, Cotton, Copper, Orange Juice, Wheat, Gold and Silver markets had a day of buoyancy, while the Corn and Soybean markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.97%higher, to see this Index registered at 389.50.  The day starts with the U.S. Dollar tending a little softer and trading at 1.270 to Sterling and at 1.117 to the Euro, while North Sea Oil is steady and is selling at $ 44.15 per barrel. 

The coffee markets started the day on Friday with the London market under some pressure and trading south of par, while the New York market started the day on a corrective positive note and with the markets maintaining this mixed stance into the early afternoon trade.  As the afternoon progressed the New York market started to add more value and initially having little influence upon the soft London market, but with buy stops being triggered within the New York market and accentuating the gains, the London market turned and headed north into modest positive territory and with the influences of further weight being added within the New York market, to likewise add more value.   But while the New York market continued on its upside track for the day, the less volatile London market hit something of a ceiling and to take a sideways positive track for late in the day trade. 

The London market ended the day on a positive note and with 84.2% of the earlier gains of the day intact, while the New York market ended the day on a very positive note and with 92.2% of the earlier gains of the day intact.  This close is somewhat supportive for confidence but there is likely to be some degree of caution and hesitancy for early trade today and thus one might expect to see only a modest follow through support as the day’s trade starts today against the prices set on Friday, as follows: 

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

JUL    2063 + 49                                            JUL     119.95 + 6.50 

SEP    2078 + 48                                            SEP    123.00 + 6.50

NOV   2056 + 41                                             DEC   126.55 + 6.50

JAN    2030 + 39                                            MAR   130.05 + 6.50

MAR   2013 + 35                                            MAY   132.40 + 6.45

MAY   2016 + 39                                            JUL    134.65 + 6.40

JUL    2039 + 44                                            SEP    136.80 + 6.30

SEP    2057 + 44                                            DEC   139.60 + 6.35

NOV   2066 + 44                                            MAR   142.40 + 6.30

JAN    2073 + 44                                            MAY   144.05 + 6.30