Coffee Market Report October 24 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 26.11% over the week of trade leading up to Tuesday 17th. October; to register a new net short sold position of 40,511 Lots.   Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 0.54%, to register a net long position of 34,310 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 25.86%, to register a net short sold position of 42,316 Lots.  This net short sold position which is the equivalent of 11,996,398 bags has most likely been modestly decreased to perhaps being little changed, following a period of mixed but overall sideways trade that has since followed and likewise, that of the Managed Money fund sector of the market. 

There have been some rains over the southern arabica coffee districts of Brazil and including Parana, Southern Sao Paulo and Southern Minas Gerais, but these have yet to impact upon the northern and eastern arabica and conilon robusta coffee districts over Northern Minas Gerais, Bahia and Espirito Santo.  Thus, the week continues with market players very much focused upon the daily weather reports from Brazil, as unless there are good rains forthcoming over the coming days and into early next month and with the speculative and fund sectors of the New Yorke market holding extensive short sold positions within the market, there could well be a relatively sharp corrective short covering recovery for this market. 

Meanwhile it was a quiet day for the New York market yesterday and it was a market that portrayed a degree of exhaustion, as players took a wait and see stance for the day.  While the physical coffee trade is meanwhile lacklustre in nature, with both consumer industry buyers and producers tending to watch rather than participate in active trade.  The former sector of the market assisted in taking such a stance in terms of the arabica coffees, by the insurance of the still substantial consumer market stocks and further illustrated, but the continued steady growth of the New York certified stocks. 

It would seem though that there are still short-term concerns over the delayed start to the new Vietnam crop on the part of the robusta coffee sector of the physical coffee trade, with short term supply threatening to become tighter, ahead of this potentially larger new crop.  This manifesting itself in a degree of stability for the London market, with the arbitrage between this market and the New York market having narrowed further over the past few days of trade. 

The January 2018 to December 2017 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 35.08 usc/Lb., while this equates to 28.21% 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 15,953 bags yesterday; to register these stocks at 1,890,617 bags.  There was meanwhile a smaller in number 6,279 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 54,346 bags. 

The commodity markets were mixed in trade yesterday, but with the markets modestly weighted towards a degree of buoyancy and the overall macro commodity index, taking a positive track for the day.   The U.S. Oil, Natural Gas, London robusta Coffee, Cotton, Copper, Wheat, Corn, Soybean, Gold and Silver markets had a day of buoyancy, while the Brent Oil, Sugar, Cocoa, New York arabica Coffee, 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 0.32% higher, to see this Index registered at 413.89.  The day starts with the U.S. Dollar steady and trading at 1.321 to Sterling and at 1.175 to the Euro, while North Sea Oil is showing a degree of buoyancy and is selling at US$ 57.60 per barrel. 

The London and New York markets started the day yesterday on a modestly softer note and with both markets remaining south of par, into the early afternoon trade.  As the afternoon progressed but within an environment of thin trade both markets posted a recovery and moved back up into positive territory but while the London market maintained a mostly modest positive stance for the rest of the day, the New York market slipped back and took a modestly negative track for late trade. 

The London market ended the day on a steady note but with only 25% of the earlier gains of the day intact, while the New York market ended the day on a soft note and with 64.3% of the earlier losses of the day intact.  This close does little to inspire, but with some degree of uncertainty over how intense the forthcoming rains might be and with the evidence of the extensive net short sold positions within the New York market, one might expect some degree of cautions and a thinly traded steady start due for the markets for early trade today, against the prices set yesterday, as follows: 

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

NOV   2018 – 2                                               DEC   124.35 – 0.90

JAN    1968 + 3                                              MAR   128.10 – 0.90

MAR   1941 + 1                                              MAY   130.50 – 0.95

MAY   1947 + 1                                              JUL    132.85 – 1.00 

JUL    1973 + 2                                              SEP    135.20 – 0.95

SEP    1979 + 2                                              DEC   138.60 – 1.00

NOV   1980 + 2                                              MAR   141.95 – 1.00

JAN    1978 + 2                                              MAY   144.00 – 1.00

MAR   1977 + 2                                              JUL    146.00 – 1.00

MAY   1982 + 2                                              SEP    147.90 – 1.00