Coffee Market Report December 18 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 48.29% during the week of trade leading up to Tuesday 12th. December; to register a net short sold position of 55,491 Lots on the day. This net short-sold position which is the equivalent of 15,731,453 bags has most likely been once again marginally decreased, following the period of mixed but overall more buoyant 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 increase their net short sold position within this market by 5.61% during the week of trade leading up to Tuesday 12th. December; to register a net short sold position of 22,397 Lots on the day.  This net short sold position which is the equivalent of 3,732,833 bags has most likely been little changed to perhaps marginally decreased again, following a period of mixed but more positive sideways trade, which has since followed. 

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks decreased by 297,527 bags or 4.23% during the month of November, to register these stocks at 6,737,486 bags at the end of the month.   It must be noted though that this is only the fourth month this year that these stocks have fallen and despite this further and relatively sharp dip in stocks for the month of October, they remain relatively substantial. 

These stocks do not include the in-transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is supported by these stocks of approximately 560,000 bags per week, would conservatively have been at least 1.1 million bags. If one is to consider the additional unreported stocks the end month stocks, this would equate to more than 13 weeks of roasting activity, which most would consider to be more than a safe reserve. 

Especially so as with the new Vietnam crop now coming to the market and accompanied by the new main crop coffees from Colombian and soon to be followed in the coming month, by the new Mexican and Central American crop coffees, that there is the potential for rising volumes from these origins to start to impact within consumer market supply.   Thus, one might speculate, that the dip in U.S.A. coffee stocks shall have little impact upon the prevailing bearish market sentiment.  

The respected U.S. Department of Agriculture Foreign Agricultural Service USDA have reported that they foresee global coffee production for the present October 2017 to September 2018 coffee year to be close to 159.9 million bags, as against their assessment of a global coffee consumption at close to 158.5 million bags and therefore for the present coffee year, a modest 1.4 million bags surplus supply.   This report and in terms of the modest surplus being forecasted and despite the production volumes being related to this years relatively modest Brazil coffee crop, would so far as weather conditions remain favourable and supportive of a significantly larger new Brazil crop in 2018, indicate the potential for a much larger surplus supply for the follow-on October 2018 to September 2019 coffee year.  

The March 2018 to March 2018 contracts arbitrage between the London and New York markets broadened on Friday, to register this at 42.60 usc/Lb., while this equates to 35.28% 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 2,760 bags on Friday; to register these stocks at 1,951,803 bags.  There were meanwhile a larger in number 4,125 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 28,165 bags. 

The commodity markets were mixed in trade on Friday yesterday, to see the overall macro commodity index taking a steady to modestly positive track for the day.   The U.S. Oil, Sugar, New York arabica Coffee, Copper, Gold and Silver markets had a day of buoyancy and Brent Oil was near to steady, while the Natural Gas, Cocoa and London robusta Coffee markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.29% higher; to register this index at 405.70.   The day starts with the U.S. Dollar steady and trading at 1.334 to Sterling, at 1.177 to the Euro and 3.342 to the Brazilian Real, while North Sea Oil is steady and is selling at US$ 63.95 per barrel. 

The London market started the day on Friday trading marginally south of par, while the New York market started the day with early buoyancy and with the markets taking a mixed negative in London and positive in New York stance, into the early afternoon trade.   As the afternoon progressed the London market continued to remain under pressure and to head towards a soft end to the week, while the New York market while falling back from a short-term rally, maintained a positive end to the week. 

The London market ended the day on a negative note and with 77.3% of the earlier losses of the day intact, while the New York market ended the day on a modestly positive note and with only 26.8% of the earlier gains of the day intact.   This close and with the New York market having failed to hold on to most of the earlier gains is not very constructive for sentiment, but perhaps the evidence of the significantly increased speculative net short sold position within the New York market, might fuel a degree of caution and set the markets for a steady start for early trade today, against the prices set on Friday, as follows: 

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

JAN    1731 – 12                                            DEC   116.95 – 2.20

MAR   1723 – 17                                            MAR   120.75 + 0.55

MAY   1731 – 16                                            MAY   122.95 + 0.50

JUL    1771 – 15                                            JUL     125.20 + 0.50 

SEP    1778 – 17                                            SEP    127.55 + 0.50

NOV   1787 – 17                                            DEC    131.10 + 0.55

JAN    1796 – 17                                            MAR   134.40 + 0.50

MAR   1806 – 17                                            MAY   136.50 + 0.50

MAY   1831 – 17                                            JUL    138.50 + 0.45

JUL    1863 – 17                                            SEP    140.45 + 0.40