Coffee Market Report November 28 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 4.86% during the week of trade leading up to Tuesday 21st. November; to register a net short sold position of 48,863 Lots on the day. This net short-sold position which is the equivalent of 13,852,444 bags has most likely been marginally decreased again, following the period of more positive trade, which has since followed. 

The respected commodity brokers Sucden Financial have reported yesterday that they forecast global coffee supply for this new October 2017 to September 2018 coffee year to be 154.4 million bags as against global coffee demand for the same period, at 158 million bags.   Therefore, they foresee that there shall be a deficit coffee supply for this present coffee year, of 3.6 million bags. 

The report does however note that so long a there are no weather problems for the main Brazil coffee districts over the next five months or so and that with the potential of a significantly larger new Brazil coffee crop due to start coming into play during the second and third quarters of next year, that the potential deficit shall not really be supportive for market sentiment.   In this respect one might suggest, that this report is somewhat neutral in nature and that the short-sold markets might only be moved north, should Brazil start to encounter some weeks of dry weather. 

The Asian Coffee Association was formally established in Mangshi City in Southwest China yesterday, with this association representing over twenty Asian countries.   This association which intends to formulate standards for coffee and more important to exchange information between the members, has to be a positive factor for the further development of coffee farming practices within some of the still relatively low yielding producers, while encouraging good coffee farming practices for the relatively new Asian countries to the industry. 

Making one think that Asia and with already an approximate 30% share of global coffee production, while being the leading region in terms of rising global coffee consumption, has the potential to significantly increase its share of both production and consumption. 

The March 2018 to March 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 50.32 usc/Lb., while this equates to 39.25% 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 834 bags yesterday; to register these stocks at 1,923,476 bags.  There was meanwhile a larger in number 6,404 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 33,374 bags. 

The commodity markets and despite the potential support from a relatively soft dollar, had a mixed day of trade yesterday and with the overall macro commodity index taking something of a sideways track for the day.   The Natural Gas, New York arabica Coffee and Gold markets had a day of buoyancy and the Silver market was steady, while the Oil, Sugar, Cocoa, London robusta Coffee and Copper markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.01% higher; to register this index at 422.57.   The day starts with the U.S. Dollar steady and trading at 1.332 to Sterling and at 1.191 to the Euro, while North Sea Oil is steady and is selling at US$ 63.50 per barrel. 

The London and New York markets started the day yesterday marginally softer than par and with the New York market starting the day to the positive side of par and with the London market remaining close to par and the New York market adding some modest gains, into the early afternoon trade.   As the afternoon progressed the London market and with origin selling playing its part came under further pressure and falling to seventeen-month lows, while the New York market encountered a short-lived rally and posting gains of 2.50 usc/Lb.   The New York market falter and fell back into more modest positive territory prior to taking a sideways track towards the close, as did the London market attract support at the lows and take as likewise sideways track towards the close. 

The London market ended the day on a negative note and with 90.6% of the earlier losses of the day intact, while the New York market ended the day on a positive note, but with only 26% of the earlier gains of he day intact.   This close once again does little to indicate direction and one might think that it shall be another slow and steady start for early trade today against the prices set yesterday, as follows: 

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

NOV   1741 – 24                                             DEC   125.55 + 0.75

JAN    1720 – 29                                            MAR   128.20 + 0.65

MAR   1717 – 20                                            MAY   130.45 + 0.60

MAY   1728 – 17                                            JUL    132.75 + 0.60 

JUL    1758 – 15                                            SEP    135.05 + 0.60

SEP    1767 – 15                                            DEC   138.45 + 0.65

NOV   1776 – 15                                            MAR   141.70 + 0.60

JAN    1786 – 15                                            MAY   143.70 + 0.60

MAR   1803 – 15                                            JUL    145.60 + 0.60

MAY   1833 – 15                                            SEP    147.45 + 0.60