Coffee Market Report October 23 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 25.86% during the week of trade leading up to Tuesday 17th. October; to register a net short sold position of 42,316 Lots on the day. This net short-sold position which is the equivalent of 11,996,398 bags has most likely been marginally decreased again, following the period of mixed but overall more positive 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 increase their net short sold position within this market by 116.75% during the week of trade leading up to Tuesday 17th. October; to register a net short sold position of 2,497 Lots.  This net short sold position which is the equivalent of 416,167 bags has most likely been little changed following the period of but modestly more positive trade, which has since followed. 

It was a lot about rain or the speculation over the prospects for the weekend and this week’s rain forecasts for the Brazil coffee districts on Friday, which saw the New York market that had initially had a thinly traded steady start to once again come under pressure, as the Americas came onto the field of play and the volumes of trade started to increase.  Albeit that some degree of renewed muscle for the U.S. dollar also came into play and along with some negative influence from the charts when the markets could not hold onto early gains, to assist to dampen coffee market spirits for the day. 

The rain aside there are questions that must be asked, about the significant speculative and fund net short position within the New York market that has the potential should there be any question of the quality of the rains over Brazil this week, to attract aggressive short liquidation and a relatively sharp recovery for the market.   However, should the rainfall reports prove to be beneficial for the holding and setting of the new crop flowerings for most of the coffee districts, it might just be a case that the speculative and fund sectors of the markets might hold on to most of their shorts and to set this volatile market for another week of trading close to the lows of the prevailing trading range.  

The January 2018 to December 2017 contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 36.12 usc/Lb., while this equates to 28.84% 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 7,979 bags on Friday; to register these stocks at 1,874,664 bags.  There was meanwhile a larger in number 11,015 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 60,625 bags. 

The commodity markets were mixed in trade on Friday, but with the U.S. dollar attracting some support and dampening spirits within many markets, it contributed towards the overall macro commodity index taking modestly a softer track for the day.   The Oil, Natural Gas and Orange Juice markets had a day of buoyancy, while the Sugar, Cocoa, Coffee, Cotton, Copper, Wheat, Corn, 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 0.1% lower, to see this Index registered at 412.58.  The day starts with the U.S. Dollar relatively steady and trading at 1.322 to Sterling and at 1.177 to the Euro, while North Sea Oil is showing a degree of buoyancy and is selling at US$ 57.40 per barrel. 

The London and New York markets started the day on Friday on a steady note and with both markets adding modest value through thin morning trade and to take a steady to positive track, into the early afternoon trade.   As the afternoon progressed though, the New York market soon slipped back into negative trade and followed by a dip south of par for the more placid London market.   The New York market triggered sell stops to accentuate the losses while the London market took something of a sideways track and joined by a partial recovery within the New York market to see both markets continue sideways towards a soft close for the day and the week. 

The London market ended the day on a negative note and with 72.7% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 56.1% of the earlier losses of the day intact.   This close while painting a poor picture for the charts, is accompanied by the factors of the extensive short sold position of the speculative and fund sectors of the market, the ability for the market to have recovered a good portion of the Friday losses by the close and the uncertainty of the rainfall reports that are due from Brazil for the next couple of days, might assist towards a degree of caution.   Thus, making one think that it is possible that there could be a degree of hesitant buoyancy due for early trade today, against the prices set on Friday, as follows: 

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

NOV   2020 – 8                                               DEC   125.25 – 1.60

JAN    1965 – 8                                              MAR   129.00 – 1.60

MAR   1940 – 10                                            MAY   131.45 – 1.60

MAY   1946 – 10                                            JUL    133.85 – 1.55 

JUL    1971 – 9                                              SEP    136.15 – 1.60

SEP    1977 – 9                                              DEC   139.60 – 1.55

NOV   1978 – 14                                            MAR   142.95 – 1.50

JAN    1976 – 14                                            MAY   145.00 – 1.45

MAR   1975 – 14                                            JUL    147.00 – 1.45

MAY   1980 – 14                                            SEP    148.90 – 1.50