Coffee Market Report December 12 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 decrease their net short sold position within the market by 12.19% over the week of trade leading up to Tuesday 5th. December; to register a new net short sold position of 35,796 Lots.   Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 2.1%, to register a net long position of 38,371 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 10.61%, to register a net short sold position of 37,420 Lots.  This net short sold position which is the equivalent of 10,608,404 bags has most likely been once again increased, following a period of mixed but overall more negative sideways trade that has since followed and likewise, that of the managed money fund sector of the market. 

The respected CoffeeNetwork market analysts has come to the fore yesterday with a forecast that even if the next 2018 Brail crop should be only 55 million bags, it would still result in a 3.7 million bags global coffee supply surplus for the next October 2018 to September 2019 coffee year.  While noting that should the next Brazil crop be as much as 60 million bags as has been forecasted by some analysts, that the surplus would be 8.7 million bags.    This report adding to the host of bearish in nature reports that prevail within the coffee markets at present, which has seen the New York market on something of a downside track for the past few weeks. 

It all does of course revolve around the Brazil rainfall reports and while so far, the spring and summer rain season has been supportive of a larger new Brazil coffee crop for next year and the rains shall continue for the coming weeks, there remains no certainty as to the rainfall prospects for the first quarter of next year.   Albeit that for the present there are no indications that Brazil might encounter partial drought conditions and presently, the general focus is upon the likely prospects for a large new crop to come. 

The first Vietnamese Coffee Day event took place on Sunday in Da Lat in the Central Highlands of Vietnam, with the event including an exhibition centre and many coffee workshops.  This event designed to lift the profile of the Vietnamese coffee industry that while being the second largest in the world, is largely seen to be related to inexpensive prices, rather than quality.   

The March 2018 to March 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 41.98 usc/Lb., while this equates to 34.98% 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 803 bags yesterday; to register these stocks at 1,938,446 bags.  There were meanwhile a larger in number 1,386 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 33,587 bags. 

The commodity markets were mixed in trade yesterday but with the influential oil markets showing a degree of renewed muscle, the overall macro commodity index managed to show a degree of buoyancy for the day.  The Oil, Natural Gas, Cocoa and Copper markets had a day of buoyancy, while the Sugar, Coffee, Cotton, Orange Juice, 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 0.185% lower; to register this index at 406.49.   The day starts with the U.S. Dollar steady and trading at 1.335 to Sterling and at 1.177 to the Euro, while North Sea Oil is showing a degree early buoyancy and is selling at US$ 66.30 per barrel. 

The London and New York markets started the day yesterday marginally south of par, but while the London market drifted marginally lower in early trade, the New York market stayed close to par into the early afternoon trade.  As the afternoon progressed the New York market slipped back below par and started to extend its losses, while the London market briefly bounced back to trade around par, prior to once again heading south and with both markets taking a softer track for the rest of the day’s trade and with the New York market registering new five and half month lows. 

The London market ended the day on a negative note and with 69% of the earlier losses of the day intact, while the New York market ended the day on a very negative note and with 85.2% of the earlier losses of the day intact.   This close continues to paint a negative picture for the New York charts, as does the Brazil Real trading at 3.30 to the dollar continue to bring fears of active Brazil new crop arabica coffee price fixation selling pressure, but there might be concerns that the New York market is somewhat oversold.  This latter factor one would think is due to bring to the fore a degree of caution and the chances for a hesitant steady start for early trade today, against the prices set yesterday, as follows: 

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

JAN    1728 – 22                                            DEC   119.00 – 1.60

MAR   1720 – 20                                            MAR   120.00 – 2.60

MAY   1728 – 19                                            MAY   122.20 – 2.60

JUL    1768 – 17                                            JUL     124.50 – 2.60 

SEP    1777 – 17                                            SEP    126.85 – 2.55

NOV   1785 – 19                                            DEC    130.35 – 2.45

JAN    1791 – 23                                            MAR   133.65 – 2.40

MAR   1801 – 23                                            MAY   135.80 – 2.35

MAY   1826 – 23                                            JUL    137.90 – 2.30

JUL    1858 – 23                                            SEP    140.00 – 2.20