Coffee Market Report October 16 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 8.32% during the week of trade leading up to Tuesday 10th. October; to register a net short sold position of 33,621 Lots on the day. This net short-sold position which is the equivalent of 9,531,404 bags has most likely been increased again, following the period of mixed but overall more negative 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 decrease their net short sold position within this market by 52.48% during the week of trade leading up to Tuesday 10th. October; to register a net short sold position of 1,152 Lots.  This net short sold position which is the equivalent of 192,000 bags has most likely been little changed, following the period of mixed but modestly sideways trade, which has since followed. 

The International Coffee Organisation have noted that while they had assessed Global coffee supply that they peg at a conservative 153.9 million bags for the just completed October 2016 to September 2017 coffee year as against a global coffee demand that they assess to have been 155.1 million bags, that consumer coffee stocks were at an eight-year high and were more than adequate to cover for their estimated deficit supply of 1.2 million bags. 

One must keep in mind though that by nature of the official status of the International Coffee Organisation, that it is obliged to use the official figures in terms of coffee production, as forwarded by the individual member countries.   These figures are often conservative numbers, which might in terms of the very modest deficit reported, indicate that there was probably little in the way of deficit supply for the just completed coffee year and is a factor, that would have contributed to the rise in the consumer market stocks over the past year. 

The respected Brazil analyst Safras & Mercado have reported that by Tuesday the 10th. October that 53% of the Brazils new coffee crop had been sold, which is a little behind the 56% factor at the same time last year, but is very much in line with the close to 50% factor by this time of the year.   This year’s Brazil crop was however a smaller crop and in terms of actual volumes sold, it would indicate that sales have suffered from internal market price resistance over the past two months and have been relatively slow so far. 

Vietnam is still encountering widespread rains and with typhoon Khanun now having an impact, which is delaying the start of the new crop harvest, while with the potential delay in the delivery of the much need new crop robusta coffee from the country, is assisting to buoy the fortunes of the London market.  These rains are however so far, not damaging for the potential of this foreseen by most to be a significantly larger new crop and it is still only a matter of time, before there shall be the potential for an easing in the presently tight origin supply of robusta coffee.  

The January 2018 to December 2017 contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 36.55 usc/Lb., while this equates to 28.9% 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 1,686 bags on Friday; to register these stocks at 1,850,909 bags.  There was meanwhile a larger in number 10,591 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 71,940 bags. 

The commodity markets with a softer U.S. dollar in play had a day of general buoyancy on Friday, to see the overall macro commodity index taking a positive track for the day.   The Oil, Natural Gas, Sugar, London robusta Coffee, Cotton, Copper, Wheat, Corn, Soybean, Gold and Silver markets had a day of buoyancy and the New York arabica Coffee market was steady, while the Cocoa and Orange Juice markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.47% higher, to see this Index registered at 414.96.  The day starts with the U.S. Dollar showing a degree of buoyancy and trading at 1.328 to Sterling and at 1.179 to the Euro, while North Sea Oil is showing a degree of buoyancy and is selling at US$ 57.35 per barrel. 

The London and New York markets started the day on Friday on a steady note and with both markets soon moving north of par, to take a positive track into the early afternoon trade.  As the afternoon progressed the New York market faltered and slipped back into negative territory but to recover prior to taking an erratic sideways track for the rest of the day and trading either side of par through to the close, while the London market managed to stay mostly within positive territory through to the close. 

The London market ended the day on a positive note and with 70% of the earlier gains of the day intact, while the New York market ended the day on a steady note and with only 12.5% of the earlier modest gains of the day intact.  This close provides little in the way of direction and especially so for the relatively muted in trade New York market, but perhaps with evidence of the extended net short position within the New York market there shall be some degree of caution to set the markets for a steady start for early trade today, against the prices set on Friday, as follows: 

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

NOV   2009 + 12                                             DEC   126.45 + 0.10

JAN    1982 + 14                                            MAR   130.20 + 0.10

MAR   1963 + 12                                            MAY   132.60 + 0.10

MAY   1968 + 9                                              JUL    134.95 + 0.10 

JUL    1992 + 9                                              SEP    137.20 + 0.10

SEP    1998 + 7                                              DEC   140.60 + 0.10

NOV   2002 + 5                                              MAR   143.90 + 0.10

JAN    2000 + 4                                              MAY   145.90 + 0.10

MAR   1999 + 1                                              JUL    147.85 + 0.05

MAY   2004 + 1                                              SEP    149.75 + 0.05