Coffee Market Report November 21 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 derease their net short sold position within the market by 8.28% over the week of trade leading up to Tuesday 14th. November; to register a new net short sold position of 44,854 Lots.   Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 10.66%, to register a net long position of 36,656 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market decreased their net short sold position within this market by 5.67%, to register a net short sold position of 46,599 Lots.  This net short sold position which is the equivalent of 13,210,601 bags has most likely been increased again, following a period of mixed but overall softer trade that has since followed and likewise, that of the Managed Money fund sector of the market. 

The respected United States Department of Agriculture USDA have reported that so long as weather conditions remain favourable over the coffee districts in Colombia, that they foresee coffee production rising by 0.68% during the present October 2017 to September 2018 coffee year, to total 14.7 million bags for the year.   They have meanwhile estimated that domestic coffee consumption shall be marginally higher at 1.6 million bags and by nature of these figures, indicating steady rather than rising export volumes of the countries fine washed arabica coffees, for the present coffee year. 

The USDA have also forecast that coffee production in India shall increase by 7.69% during the present October 2017 to September 2018 coffee year, to total 5.6 million bags.   This production forecast being related to 143,000 bags or 9.03% dip in arabica coffee production which they foresee to be 1.44 million bags, but this dip in arabica coffee production in terms of overall coffee supply for this coffee year shall be countered by 543,000 bags or a 15.01% increase in robusta coffee consumption, which they foresee shall be 4.16 million bags. 

These USDA figures while adding to the perspective of increased coffee supply from India, where they assess domestic coffee consumption to be 1,205,000 bags per annum, do not clearly reflect an easy to calculate coffee export potential from India for the coffee year, as the country allows for imports of coffee to fuel value added processed soluble coffee exports.   In this respect, they have forecast that with the added imported coffee supply, that India shall export approximately 3.96 million bags of bean coffee and along with, the equivalent of 1.583 million bags of coffee in the form of soluble coffees.  

These latest USDA reports do little to counter the prevailing bearish nature of the coffee markets, but one must be cautious over the significant net short sold situation within the volatile New York market, which following the past four days of trade, is likely to have been increased.   This situation remaining the only potential bullish factor for the markets, as while presently unforeseen, should there be any climatic problems coming to the fore for any of the main producers, the resulting short covering within the market might prove to fuel a rather dramatic rally for the market. 

The March 2018 to March 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 44.51 usc/Lb., while this equates to 35.4% 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 2,784 bags yesterday; to register these stocks at 1,913,042 bags.  There was meanwhile a larger in number 5,972 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 32,692 bags. 

The commodity markets encountered renewed muscle for the U.S. dollar yesterday, with many markets tending softer and likewise, the overall macro commodity index took a softer track for the day.  The Copper market had a day of buoyancy, while the Oil, 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 0.77% lower, to see this Index registered at 419.16.  The day starts with the U.S. Dollar steady and trading at 1.325 to Sterling and at 1.174 to the Euro, while North Sea Oil is steady and is selling at US$ 61.70 per barrel. 

The London and New York markets started the day yesterday marginally south of par and with the London market recovering to trade close to par, while the New York market remained south of par, into the early afternoon trade.  As the afternoon progressed the New York market started to come under pressure and to extend the losses, while the London market moved back into modest negative territory and to set both markets for a soft close for the day. 

The London market ended the day on a negative note and with 87.5% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 62.5% 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 yesterday, as follows: 

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

NOV   1835 – 28                                             DEC   122.90 – 0.90

JAN    1810 – 14                                            MAR   125.75 – 1.50

MAR   1791 – 10                                            MAY   128.00 – 1.55

MAY   1796 – 10                                             JUL   130.40 – 1.50 

JUL    1821 – 10                                            SEP    132.65 – 1.55

SEP    1830 – 9                                              DEC   136.05 – 1.50

NOV   1838 – 9                                              MAR   139.30 – 1.55

JAN    1848 – 9                                              MAY   141.35 – 1.50

MAR   1856 – 9                                              JUL    143.30 – 1.45

MAY   1866 – 9                                              SEP    145.25 – 1.40