Coffee Market Report November 01 2016

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 increase their net long position within the market by 17.55% over the week of trade leading up to Tuesday 25th. October; to register a net long position of 50,651 Lots.   Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 0.50%, to register a net long position of 38,789 Lots on the day. 

Over the same week the Non-Commercial Speculative sector of this market increased their long position within the market by 30.87%, to register net long position of 51,090 Lots.   This net long position which is the equivalent of 14,483,789 bags is most likely to be little changed to perhaps marginally lower, following the period of mixed but overall near to steady trade that has since followed and likewise, that of the Managed Money fund sector of the market. 

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 6.52% during the week of trade leading up to Tuesday 25th. October; to register a long position of 36,067 Lots.  This net long position which is the equivalent of 6,011,167 bags has most likely been little changed to marginally increased, following the period of mixed but overall positive trade that has since followed. 

With the month of October past, the Indonesia government trade data from Sumatra which is the leading coffee producing island within Indonesia, has reported that the islands robusta coffee exports for the month were 281,701 bags or 43.15% lower than the same month last year, at a total of 371,162 bags.  This dip in exports follows the cumulative robusta coffee exports for the October 2015 to September 2016 coffee year, which were 2,678,617 bags or 50.49% lower than the same period in the previous coffee year, at a total of 2,626,936 bags. 

This sharp dip in robusta coffee exports for the previous coffee year and for the start of this new October 2016 to September 2017 coffee year from Sumatra, is very much in line with the expectations of a lower new crop that was due from this important robusta coffee supplier.  This resulting from the relatively dry conditions that were experienced over the last quarter of last year and the first quarter of this year, as a result of the El Nino phenomenon that occurred.   This more modest Indonesian robusta coffee supply to be accompanied by negligible conilon robusta coffee supply from Brazil over the same period, to leave Vietnam and its controlled and price resistant farmers to be very much holding the reigns of consumer market robusta coffee supply over the next nine months.  

The International Coffee Organisation have reported that global coffee exports for the month of September were 1.1% higher than the same month last year, at a total of 8.99 million bags.   This they say has resulted in the global coffee exports for the just completed October 2015 to September 2016 coffee year to have been 0.7% lower than the previous coffee year, at a total of 111.83 million bags. 

The March to March contracts arbitrage between the London and New York markets narrowed on yesterday, to register this at 68.53 usc/Lb., while this equates to a 40.90% price discount for the London robusta coffee market.  This arbitrage is perhaps becoming a less attractive factor for the roasters who have considered robusta coffees to be an opportunist discount component, within their mostly arabica coffee blends. 

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 1,574 bags yesterday; to register these stocks at 1,274,978 bags.  There were meanwhile a larger in number 1,815 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 28,250 bags. 

The commodity markets had a generally softer day yesterday, with the overall macro commodity index taking a softer track for the day.     The Copper, Orange Juice, Wheat and Silver markets nevertheless had a day of buoyancy and the London robusta Coffee and Soybean markets were near to steady for the day, while the Oil, Natural Gas, Sugar, Cocoa, New York arabica Coffee, Cotton, Corn and Gold markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.71% lower; to see this Index registered at 422.45.   The day starts with the U.S. dollar steady and trading at 1.222 to Sterling and 1.096 to the Euro, while North Sea Oil is showing a degree of buoyancy and is selling at 46.90 per barrel. 

The London market started the day yesterday with a predictable corrective negative track being taken within both markets and with the markets maintaining this track into the afternoon trade, when there was a brief recovery for the New York market back up to pip through par and followed by a bounce off the lows for the London market.   The recovery within the New York market was however short lived and the market soon slid back into negative territory and shrugging off a follow on brief positive correction, slipped back to take a softer track for the rest of the day, while the fundamentally more positive London market started to show some muscle and trad back to around par for the rest of the day’s trade.   The London market ended the day on a near to steady note and having recovered 81.2% of the earlier losses of the day, while the New York market ended the day on a modestly negative note and with 54.9% of the earlier losses of the day intact.   This mixed close and with the New York losses more technical than fundamental is nevertheless likely to inspire a degree of caution, as there are fears that the markets might still be seen to be overbought and and one would think that one can expect 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. 

NOV     2229 + 41                                               DEC   164.15 – 1.35

JAN      2184 – 3                                                MAR   167.55 – 1.40

MAR     2183 – 3                                                MAY   169.70 – 1.35

MAY     2189 – 3                                                  JUL   171.45 – 1.40

JUL      2193 unch                                              SEP   173.10 – 1.40

SEP      2199 + 1                                                 DEC   175.30 – 1.45

NOV     2205 + 1                                                 MAR   177.05 – 1.45

JAN      2214 + 3                                                 MAY   178.05 – 1.45

MAR     2229 + 5                                                  JUL   179.00 – 1.40

MAY     2246 + 11                                                SEP   179.90 – 1.35