Coffee Market Report August 30 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 long position within the market by 5,131.93% over the week of trade leading up to Tuesday 22nd. August; to register a new net short sold position of 14,341 Lots.   Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 0.73%, to register a net long position of 33,974 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 361.46%, to register a net short sold position of 19,012 Lots.  This net short sold position which is the equivalent of 5,389,818 bags has most likely been increased further, following the mixed but overall more negative trade which has since followed and likewise, that of the Managed Money fund sector of the market. 

Yesterday brought with it speculation that the new Brazil conilon robusta coffee crop was not as small as many had speculated, while with the presumption that weather conditions for this year and the first half of next year shall be normal, that Brazil has the potential for a new 2018 coffee crop that might be as much as 60 million bags.   Factors that along with the pending larger new Central American and Vietnam crops that are now only a couple of months to the fore, are proving to be bearish for market sentiment. 

This aside from the evidence of the steadily rising certified washed arabica coffee stocks that are held against the New York market, which also is starting to impact upon market sentiment.   Especially so as these stocks are dominated by the Central and South American washed arabica coffees and are rising prior to the nearby impact of a further good new Colombian main crop and the larger new Mexican and Central American crop, which indicates that there shall be no chance of short to medium term tightness of arabica coffee supply. 

The November to December contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 33.17 usc/Lb., while this equates to 25.78% 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 10,299 bags yesterday; to register these stocks at 1,676,058 bags.  There was meanwhile a larger in number 12,682 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 100,879 bags. 

These washed arabica coffee stocks are dominated by the 38.04% share that is related to Honduras coffees, while the producer bloc of Mexico and Central America and including Honduras, contribute to a dominant 53.23% of the stocks and followed by a 14.83% share contributed by Peru coffees and a 13.42% share contributed by Colombian coffees.  This followed by a 11.95% share contributed by the African countries, a 4.07% share contributed by Brazil, a 2.07% share contributed by India and a 0.45% share related to coffees from Papua New Guinea. 

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 7,167 bags or 0.29% over the week of trade leading up to Monday 28th. August, to see these stocks registered at 2,472,167 bags, on the day. 

The commodity markets were mixed in trade yesterday but mostly looking south and therefore, with the overall macro commodity index taking a softer track for the day.   The Cocoa, Copper and Gold markets had a day of buoyancy and the Copper market was steady, while the Oil, Sugar, Coffee and Wheat markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.5% lower, to see this Index registered at 397.30.  The day starts with the U.S. Dollar steady and trading at 1.293 to Sterling and at 1.197 to the Euro, while North Sea Oil is steady and is selling at $ 51.70 per barrel. 

The London and New York markets started the day yesterday with early buoyancy, but with the New York market soon coming under pressure to slip back below par and with the London market holding steady and taking a sideways track around par into the early afternoon trade.   As the afternoon progressed the New York market attracted additional pressure and with sell stops being triggered to accentuate the losses, while the London market while south of par, managed to progress on a steadier sideways track.   

The New York market ended the day on a very soft note and with 85.7% of the earlier losses of the day intact, while the London market ended the day on a soft note, but with only 43.7% of the earlier losses of the day intact.  This close and with nothing in the way of supportive fundamental news for arabica coffees is tending to paint a negative technical picture for the New York market, while the London market and with a short-term tightness in robusta coffee supply is looking more stable.   But one might think that following the late in the day demise for the New York market yesterday that both markets are only due for 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. 

SEP    2146 – 4                                               SEP    127.30 – 2.60

NOV   2105 – 7                                                DEC   128.65 – 2.70

JAN    2066 – 9                                               MAR   132.10 – 2.70

MAR   2049 – 10                                             MAY   134.40 – 2.65

MAY   2051 – 10                                             JUL    136.65 – 2.70

JUL    2068 – 10                                             SEP    138.90 – 2.70

SEP    2069 – 15                                             DEC   142.10 – 2.80

NOV   2073 – 21                                             MAR   145.25 – 2.85

JAN    2079 – 26                                             MAY   147.30 – 2.90

MAR   2084 – 26                                             JUL    149.30 – 2.85