Coffee Market Report October 17 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 increase their net short sold position within the market by 18.4% over the week of trade leading up to Tuesday 10th. October; to register a new net short sold position of 32,124 Lots.   Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 0.81%, to register a net long position of 34,496 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market increased their net short sold position within this market by 8.32%, to register a net short sold position of 33,621 Lots.  This net short sold position which is the equivalent of 9,531,404 bags has most likely been increased again, following a period of mixed but mostly negative trade that has since followed and likewise, that of the Managed Money fund sector of the market. 

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks decreased by 76,308 bags or 1.05% during the month of September, to register these stocks at 7,189,719 bags at the end of the month.   It must be noted though that this is only the second month this year that these stocks have fallen and despite this dip in stocks for the month of September, 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 14.5 weeks of roasting activity, which most would consider to be more than a safe reserve. 

One would think that with slower sales out of a well sold Vietnam ahead of their still to start in unrest new crop and the slow start to sales and exports out of a somewhat price resistant internal market in Brazil over the past couple of months, one might expect to see the U.S.A. stocks decrease further during this month and most probably again, during the month of November.    It is most likely that it shall be the same for the leading European consumer market bloc, but by December and increasing further in January next year, there shall be the free flow of new crop Central American, Colombian and Vietnam coffees coming into the markets and even with the prospects of a more modest supply of Brazil arabica coffees through to July next year, one would not expect to see any dramatic fall in the consumer market stocks for the coming year.  But rather a return a return to more normal levels, of the equivalent of 10 to 12 weeks of roasting activity for the mainstream consumer markets. 

The January 2018 to December 2017 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 35.12 usc/Lb., while this equates to 28.38% 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 5,556 bags yesterday; to register these stocks at 1,856,465 bags.  There was meanwhile a larger in number 11,024 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 60,916 bags. 

The commodity markets encountered a steady to marginally positive stance being taken by the U.S. dollar and were mixed in trade yesterday, with the overall macro commodity index tending marginally softer for the day.   The Oil and Copper markets had a day of buoyancy, while the Sugar, Cocoa, Coffee, 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 0.16% lower, to see this Index registered at 414.29.  The day starts with the U.S. Dollar showing a degree of buoyancy and trading at 1.325 to Sterling and at 1.177 to the Euro, while North Sea Oil is near to steady and is selling at US$ 57.50 per barrel. 

The London market started the day yesterday on a hesitantly steady note, while the New York market started the day marginally south of par, but with both markets soon losing their way and moving into negative territory and to maintain this softer stance into the early afternoon trade.   As the afternoon progressed and with forecasts for much needed rains for the end of the week in Brazil coming to the market, the New York market came under further pressure and followed by a less aggressive slide south for the London market, to see both the markets taking a softer track through to the close. 

The London market ended the day on a negative note and with 71.8% of the earlier losses of the day intact, while the New York market ended the day on a very negative note and with 98.2% of the earlier losses of the day intact.  This close does very little to inspire and paints something of a negative technical picture for the charts and particularly so, for the very volatile New York market.  However it would also suggest that the speculative and managed money fund sectors are by now extremely short into this market and this might well stall the bears within the market, to assist towards a hesitantly steady start for early trade today against the prices set yesterday, as follows: 

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

NOV   1988 – 21                                             DEC   123.75 – 2.70

JAN    1954 – 28                                            MAR   127.60 – 2.60

MAR   1932 – 31                                            MAY   130.05 – 2.55

MAY   1936 – 32                                            JUL    132.45 – 2.50 

JUL    1960 – 32                                            SEP    134.80 – 2.40

SEP    1966 – 32                                            DEC   138.20 – 2.40

NOV   1973 – 29                                            MAR   141.55 – 2.35

JAN    1971 – 29                                            MAY   143.55 – 2.35

MAR   1970 – 29                                            JUL    145.60 – 2.25

MAY   1975 – 29                                            SEP    147.50 – 2.25