Coffee Market Report September 18 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 2.27% during the week of trade leading up to Tuesday 12th. September; to register a net short sold position of 32,373 Lots on the day. This net short-sold position which is the equivalent of 9,177,602 bags has most likely been little decreased again, following the period of mixed but overall more positive short covering trade, which has since followed. 

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks decreased by 147,285 bags or 1.99% during the month of August, to register these stocks at 7,266,027 bags at the end of the month.   It has to be noted though that this is the first month this year that these stocks have fallen and despite this dip in stocks for the month of August, they remain substantial. 

These stocks do not include the in-transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is supported by these stocks of approximately 560,000 bags per week, would conservatively have been at least 1.1 million bags. If one is to consider the additional unreported stocks the end month stocks, this would equate to approximately 14.9 weeks of roasting activity, which may be considered to be more than a safe reserve. 

Nevertheless it would seem that the halt to the steady rise in green coffee stocks in the U.S.A. did assist on Friday and along with the evidence of the extensive speculative net short position within the New York market, did assist to buoy speculative spirits within the market for the end of last week.    This more positive view towards the market being assisted by the range of respected reports that have recently come to the market from both international coffee brokers and trade houses, which all agree on some degree of deficit coffee supply of between 3 million and 6 million bags, for the forthcoming October 2017 to September 2018 coffee year. 

The news on Friday out of Vietnam was that Typhoon Doksuri while being destructive for many districts within central Vietnam and particularly so for the coastal areas, it has not been seen to have been destructive to the main coffee growing districts.   But rather has brought with it some good volumes of late in the season rains and ahead of the new crop harvest that is now only a few weeks away from starting.  Therefore with forecasts for a larger new Vietnam crop and one that is dominated by a 94.5% robusta coffee component, this new crop continues to weigh upon speculative sentiment within the London market. 

The main coffee districts within Brazil remain mostly dry and with medium term forecasts presently only looking towards the possibility of some light rains to come to the fore for the end of the month, which is a factor that might be seen to be threatening for the prospects of the early flowerings within the main arabica coffees districts, which came with the short spell of rains in August.   However for the present there has not been too much concern over this issue being voiced out of Brazil, but it might still be a factor that shall come to the fore before the end of the month, if there are no positive short term rainfall forecasts starting to come the fore. 

The November to December contracts arbitrage between the London and New York markets broadened on Friday, to register this at 51.04 usc/Lb., while this equates to 36.10% 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 5,715 bags on Friday; to register these stocks at 1,788,862 bags.  There was meanwhile a smaller in number 1,830 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 64,600 bags. 

It was a mixed day for the commodity markets on Friday, but the overall macro commodity index did manage to remain show some degree of buoyancy for the day.  The Sugar, Cocoa, New York arabica Coffee, Wheat and Corn markets had a day of buoyancy and the London robusta Coffee market ended the day on a steady note, while the Oil, Natural Gas, Cotton, Copper, Soybean, Gold and Silver markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.5% higher, to see this Index registered at 412.87.  The day starts with the U.S. Dollar near to steady and trading at 1.360 to Sterling and at 1.194 to the Euro, while North Sea Oil is steady and is selling at US$ 56.15 per barrel. 

The London and New York markets started the day on a steady note, but with both markets tending softer towards early afternoon trade.    As the afternoon progressed the New York market started to attract supportive short covering buying interest, the London market came under pressure from speculative long liquidations and a somewhat complacent industry sector, ahead of a new Vietnam crop.   The New York market continued to take a steady upside track for the rest of the day, while with perhaps some influence from the positive nature of the New York market, the London market bounced back from the lows towards a steady close. 

The London market ended the day on a steady note and having recovered 96.7% of the earlier losses of the day by the close, while the New York market ended the day on a very positive note and with 93.7% of the earlier gains of the day intact.   This relatively positive close on Friday might be seen to be constructive for sentiment and may well assist towards a steady start for early trade today, against the prices set on Friday, as follows: 

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

SEP    2013 – 1                                              SEP    140.00 + 4.15

NOV   1992 – 1                                               DEC   141.40 + 3.75

JAN    1980 – 1                                              MAR   144.85 + 3.75

MAR   1977 unch                                           MAY   147.10 + 3.70

MAY   1988 unch                                           JUL    149.35 + 3.70 

JUL    2016 + 1                                              SEP    151.55 + 3.60

SEP    2025 + 1                                              DEC   154.85 + 3.65

NOV   2036 + 1                                              MAR   158.05 + 3.65

JAN    2047 + 1                                              MAY   160.05 + 3.65

MAR   2052 + 1                                              JUL    161.95 + 3.60