Coffee Market Report July 25 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 decrease their net short sold position within the market by 25.84% over the week of trade leading up to Tuesday 18th. July; to register a new net short-sold position of 29,521 Lots.   Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 1.4%, to register a net long position of 32,547 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market decreased their net short sold position within this market by 25.13%, to register a net short sold position of 30,740 Lots.  This net short sold position which is the equivalent of 8,714,654 bags has most likely been marginally reduced, following the period of mixed but overall more positive trade, which has since followed. 

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 9.88% during the week of trade leading up to Tuesday 18th. July; to register a net long position of 21,197 Lots.  This net long position which is the equivalent of 3,532,833 bags has most likely been little changed to perhaps marginally decreased again, following the period of mixed but overall more negative trade that has since followed. 

There are reports from Brazil that farmers in some arabica coffee districts are experiencing higher levels of coffee borer beetle or Broca damage to their coffee beans this year, which is damaging the volumes of premium quality coffee beans from the new harvest.   This is indicating that there shall be a higher percentage of lower grade coffees from this year’s new crop harvest, while they appropriate the increase in borer beetle damage to the combination of the spraying of non-endolsulfan pesticide controls and the unseasonal rains that have been experienced over the past couple of months.

 

One might however speculate that with a vibrant and high volume domestic coffee roasting industry that absorbs approximately 21 million bags of coffee per annum and with these roasters able to absorb relatively high volumes of lower grade coffees, that the problem might not actually damage the availability of higher grade coffees for the export markets.   Thus, might not expect that it shall not really have much impact upon consumer market supply of Brazil arabica coffee for the coming October 2017 to September 2018 coffee year, albeit that with a forecasted smaller arabica coffee crop this year, there shall be a tighter supply through to July next year. 

It would furthermore suggest that these indications of higher percentages of lower grade arabica coffees from the new crop in Brazil in terms of their limited influence upon overall volume, are unlikely to influence speculative sentiment within the New York market.   While with the Brazil frost season coming to a close in approximately three weeks’ time, the weather issues in Brazil are not having any influence upon the international coffee market. 

The September to September contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 37.16 usc/Lb., while this equates to a 28.03% 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 1,839 bags yesterday; to register these stocks at 1,539,911 bags.  There were meanwhile a larger in number 15,715 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 41,606 bags. 

The commodity markets had a mixed day yesterday but with the overall macro commodity index nevertheless, taking a negative track for the day.  The Copper, Orange Juice, Gold and Silver markets had a day of buoyancy and the Sugar and Cocoa markets were steady, while the Oil, Coffee and Grain markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.54% lower, to see this Index registered at 402.86.  The day starts with the U.S. Dollar steady and trading at 1.303 to Sterling and at 1.166 to the Euro, while North Sea Oil is steady and is selling at $ 48.05 per barrel. 

The London and New York coffee markets experienced a hesitantly steady start to the day yesterday, but with both markets coming under pressure and heading back into negative territory.  As the afternoon progressed both markets recovered to trade close to par but this was not sustained and both markets once again came under pressure in late trade, to end the day in relatively deep negative territory.   

The London market ended the day on a very soft note and with 90.9% of the earlier losses of the day intact, while the New York market ended the day on a likewise very soft note and with 96.4% of the earlier losses of the day intact.   This very soft close is unlikely to inspire confidence and one might think that the markets are due for little better than a near to steady start for early trade today against the prices set yesterday, as follows: 

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

JUL    2122 – 45 

SEP    2103 – 40                                            SEP    132.55 – 4.00

NOV   2087 – 38                                             DEC   136.15 – 3.95

JAN    2063 – 37                                            MAR   139.65 – 3.95

MAR   2050 – 37                                            MAY   141.90 – 3.95

MAY   2057 – 39                                            JUL    144.05 – 3.90

JUL    2074 – 39                                            SEP    146.15 – 3.85

SEP    2084 – 39                                            DEC   149.00 – 3.85

NOV   2097 – 39                                            MAR   151.80 – 3.85

JAN    2104 – 39                                            MAY   153.35 – 3.85