Coffee Market Report November 20 2017

The latest Commitment of Traders report from the New York arabica coffee market has seen the Non-Commercial Speculative sector of this market decrease their net short sold position within the market by 5.67% during the week of trade leading up to Tuesday 14th. November; to register a net short sold position of 46,599 Lots on the day. This net short-sold position which is the equivalent of 13,210,610 bags has most likely been little changed to perhaps marginally 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 0.33% during the week of trade leading up to Tuesday 14th. November; to register a net short sold position of 15,007 Lots.  This net short sold position which is the equivalent of 2,501,167 bags has most likely been marginally increased following a period of mixed but tending softer trade, which has since followed. 

The respected Brazilian analysts Safras & Mercado announced on Friday that they had reduced by 1.27% their assessment of the new Brazil coffee crop this year from their initial figure of 51.1 million bags, to a more modest figure of 50.45 million bags.   In this respect they have decreased their assessment of the new arabica coffee crop by 800,000 bags to 38.8 million bags, while increasing their assessment of the new conilon robusta coffee crop by 150,000 bags, to 11.65 million bags.   While in terms of their view of a more modest arabica coffee crop, they note that the percentage of bolder screen 17 plus coffee beans was this year only between 20% to 25%, as against the traditional 30% bolder bean factor. 

This lowering of the new Brazil coffee crop was supported by a similar report from the respected U.S. Department of Agriculture USDA, who likewise announced on Friday that they had lowered by 1.73% their assessment of the new Brazil crop, to a more modest new crop figure of 51.2 million bags.   In this respect and noting that the bean outturns for the arabica coffees were lower than they had earlier estimated, they reduced their assessment of the new arabica coffee crop by 1.7 million bags, to a new figure of 38.8 million bags. 

The same USDA report has also forecast that Brazilian domestic coffee consumption shall increase to 22.2 million bags per annum and with this increase and only modest carryover stocks into the new Brazil crop, they have reduced their forecast for exports from this new crop by 2.6 million bags, to now estimate relatively modest 30.4 million bags for this new October 2017 to September 2018 coffee year.   One might however question that so long as the Brazil weather remains relatively stable for the next six months and brings to the fore a larger new conilon robusta coffee crop by May 2018 and followed by the start of deliveries from a larger new arabica coffee crop by July 2018, might not the availability of these coffees within the tail end of the new coffee year, contribute towards increased export volumes for the tail end of the coffee year.  

The U.S. Department of Agriculture have also come forth with a somewhat disappointing assessment and forecast for coffee production for the countries April 2017 to March 2018 coffee year, in that they foresee that production shall only be 2.83% higher than the previous 2016 to 2017 season, at 10.9 million bags.  This well below the assessed production for their 2015 to 2016 season, of 12.1 million bags.   While the same report has forecast that domestic coffee consumption in Indonesia shall increase by 2.17% for the present 2017 to 2018 season, to a total of 3,290,000 bags. 

The March 2018 to March 2018 contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 45.56 usc/Lb., while this equates to 35.8% price discount for the London Robusta coffee market.  

The Certified washed Arabica coffee stocks held against the New York exchange posted no change on Friday; to register these stocks at 1,910,258 bags.  There was meanwhile a 1,710 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 38,664 bags. 

The commodity markets and with a softer U.S. dollar in play, had a mostly positive day on Friday, to see the overall macro commodity index taking a positive track for the day.   The Oil, Natural Gas, Sugar, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean, Gold and Silver markets had a day of buoyancy, while the Cocoa and Coffee markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.9% higher, to see this Index registered at 422.35.  The day starts with the U.S. Dollar gaining against the Euro but only steady against the broad range of currencies and trading at 1.321 to Sterling and at 1.174 to the Euro, while North Sea Oil is steady and is selling at US$ 62.05 per barrel. 

The London and New York markets started the day on Friday on a marginally softer note that maintaining this softer stance, into the early afternoon trade.   As the afternoon progressed both markets attracted additional selling pressure and particularly so the New York market, which with sell stops being triggered, dropped into deep negative territory, before both markets bottomed out and took a soft sideways track through to the close. 

The London market ended the day on a negative note and with 77.8% of the earlier losses of the day intact, while the New York market ended the day on a very negative note and with 93.5% of the earlier losses of the day intact.   This close contributes towards a negative technical picture and does little to inspire, but one might expect to nevertheless see a cautious steady start due for the markets for early trade today, against the prices set on Friday, as follows: 

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

NOV   1863 – 21                                             DEC   123.80 – 2.90

JAN    1824 – 21                                            MAR   127.25 – 2.90

MAR   1801 – 21                                            MAY   129.55 – 2.80

MAY   1806 – 21                                             JUL   131.90 – 2.80 

JUL    1831 – 22                                            SEP    134.20 – 2.80

SEP    1839 – 21                                            DEC   137.55 – 2.80

NOV   1847 – 18                                            MAR   140.85 – 2.75

JAN    1857 – 17                                            MAY   142.85 – 2.70

MAR   1865 – 17                                            JUL    144.75 – 2.65

MAY   1875 – 17                                            SEP    146.65 – 2.65