Coffee Market Report January 16 2018

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 12.57% over the week of trade leading up to Tuesday 9th. January; to register a new net short sold position of 41,814 Lots.   Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 8.32%, to register a net long position of 37,754 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 12.39%, to register a net short sold position of 42,828 Lots.  This net short sold position which is the equivalent of 12,141,548 bags has most likely been once again increased, following a period mixed but overall more negative trade that has since followed and likewise, that of the managed money fund sector of the market. 

So far, this month most of the main coffee districts in Brazil have experienced reasonable rains and following the past two months of rains, many forecast a bumper new arabica coffee crop for Brazil this year and likewise, an overall bumper new crop.   However, there are also some reports that caution that due to some hot and dry spells last year that the condition of coffee trees within many districts were not perfect and that despite the fair to good rains that have followed, that the new crop might not be as large as many continue to forecast. 

Thus, while the possible prospects for a bumper new crop for Brazil this year continues to favour the bears within the volatile New York market and to depress the coffee markets in general, they remain vulnerable to a positive short covering rally against any two to three-week dry spells in South East Brazil that might be forthcoming, during the next couple of months.   A factor that is not impossible in terms of unpredictable global weather and especially so, as the speculative and fund sectors of the market presently hold extensive net short sold positions within the coffee markets. 

With the new crop harvest in play in Mexico and Central America, there are concerns being voiced within most of the producers, over the cost of labour relative to the soft prices that the new crop coffees can now attract, because of the soft nature of the reference prices of the New York market.   This factor and with farmers often struggling to find sufficient labour to harvest ripe cherry on time and to maximise the overall quality potential of the new crop, is further threatening to the price and income potential for many farmers. 

The March 2018 to March 2018 contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 43.82 usc/Lb., while this equates to 35.84% 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 on Friday; to register these stocks at 2,005,320 bags.  There was meanwhile a larger in number 30,780 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 55,158 bags.  

The commodity markets and with the dominant U.S.A. based markets off the field of play for the Martin Luther King Jnr. Public holiday yesterday, were not a feature yesterday and with the thinly traded Sugar, Cocoa and Robusta Coffee markets having a mixed day in London yesterday.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets thus remains at Fridays level; to register this index at 424.00.   The day starts with the U.S. Dollar marginally softer and trading at 1.379 to Sterling, at 1.226 to the Euro and 3.216 to the Brazilian Real, while North Sea Oil is near to steady and is selling at US$ 70.30 per barrel. 

The London market trading solo yesterday, started the day marginally south of par and maintained this stance into the early afternoon trade, when the market recovered to move marginally north of par and to maintain this close to par trade and with values having peaked by $ 5.00 per ton either side of par, through to the close. 

The London market ended the day on a steady note and with 20% of the earlier modest gains of the day intact, which provides for little indication of direction.   The question is now what stance might be taken within the New York market that returns to the field of play today and in this respect, one might expect to see a degree of caution and a slow start for both markets, which is likely to inspire only a steady start for early trade today against the prices set in New York on Friday and in London yesterday, as follows: 

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

JAN    1747 + 1 

MAR   1729 + 1                                              MAR   122.25 – 0.55

MAY   1725 + 1                                              MAY   124.70 – 0.55

JUL    1755 + 1                                              JUL    127.05 – 0.55 

SEP    1759 + 1                                              SEP    129.40 – 0.60

NOV   1764 + 1                                              DEC    132.85 – 0.55

JAN    1770 + 1                                              MAR   136.15 – 0.60

MAR   1786 + 1                                              MAY   138.30 – 0.55

MAY   1804 unch                                            JUL   140.20 – 0.55

JUL    1834 – 2                                               SEP   141.95 – 0.60