Coffee Market Report December 19 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 increase their net short sold position within the market by 45.95% over the week of trade leading up to Tuesday 12th. December; to register a new net short sold position of 52,246 Lots.   Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 1.05%, to register a net long position of 38,773 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market increased their net short sold position within this market by 48.29%, to register a net short sold position of 55,491 Lots.  This net short sold position which is the equivalent of 15,731,453 bags has most likely been once again decreased, following a period of mixed but overall more positive trade that has since followed and likewise, that of the managed money fund sector of the market. 

The extensive fund and speculative net short sold position as at the 12th. December has proven to be somewhat supportive for the New York market, as it has inspired some degree of short covering activity and contributed towards a degree of buoyancy for the market.   This has so far only been modest in nature, as the market continues to look to more than adequate coffee supply for the short to medium term on the back of the consumer market stocks and the rising volumes of new crop Vietnam, Mexican and Central American coffees due to impact, along with the prevailing good rains in the Brazil and the possibility of a much larger new Brazil arabica coffee crop due to impact in the middle of the coming year. 

Meanwhile the new Indian coffee harvest has started and with the countries new arabica coffee crop already picking up in volume, while the new robusta coffee harvest is due to start impacting in the coming month.   This crop has been forecast to be an overall larger new crop and shall also start to impact upon consumer market supply, within the next couple of months.    Thus, adding to the perspective of more than adequate short to medium term overall global coffee supply and the prevailing negative sentiment, which is hanging over the coffee markets. 

The Ministry of Agriculture and Rural Development in Vietnam have reported that they assess that approximately 86,000 hectares or 13.8% of the countries coffee growing area have coffee trees that are over twenty years old and are by nature, relatively low yielding.  Therefore, they ministry intends to invest relatively aggressively into the development of new higher yielding and disease resistant coffee varieties, so as to assist farmers in an ongoing aged trees replacement program and towards increased coffee production for the future. 

The March 2018 to March 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 43.61 usc/Lb., while this equates to 35.78% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 250 bags yesterday; to register these stocks at 1,951,553 bags.  There were meanwhile a larger in number 1,375 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 29,540 bags. 

The commodity markets were mixed in trade yesterday, but with the overall macro commodity index taking a modest upside track for the day.   The Natural Gas, Sugar, Cocoa, Coffee, Copper, Wheat, Gold and Silver markets had a day of buoyancy, while the Oil, Cotton, Orange Juice and Soybean markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.51% higher; to register this index at 407.77.   The day starts with the U.S. Dollar steady and trading at 1.338 to Sterling, at 1.179 to the Euro and 3.297 to the Brazilian Real, while North Sea Oil is showing a degree of buoyancy and is selling at US$ 64.50 per barrel. 

The London market and New York markets started the day yesterday with a degree of buoyancy but with the London market only modestly so and sticking close to par, while the New York market took a more positive stance, into the early afternoon trade.   As the afternoon progressed the New York market and with support from the combination of a firmer Brazil Real indicating the probability of slower selling from Brazil and the potential for some volumes of speculative covering, started to add value and to extend the gains.   This was followed by some modest additional value for the London market, but with both markets coming off the boil in later trade and heading towards a more modest positive close. 

The London market ended the day on a modestly positive note and with 33.3% of the earlier gains of the day intact, while the New York market ended the day on a likewise modestly positive note and with 37.7% of the earlier gains of the day intact.   This close does assist to inspire some degree of confidence in a potentially steady stance due for the markets and one might expect to see something of a 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. 

JAN    1726 – 5                                              DEC   118.55 + 1.60

MAR   1726 + 3                                              MAR   121.90 + 1.15

MAY   1733 + 2                                              MAY   124.15 + 1.20

JUL    1772 + 1                                              JUL     126.50 + 1.30 

SEP    1779 + 1                                              SEP    128.85 + 1.30

NOV   1788 + 1                                              DEC    132.35 + 1.25

JAN    1797 + 1                                              MAR   135.70 + 1.30

MAR   1807 + 1                                              MAY   137.80 + 1.30

MAY   1832 + 1                                              JUL    139.80 + 1.30

JUL    1864 + 1                                              SEP    141.70 + 1.25